Morris & Morris
[2023] FedCFamC1A 193
•10 November 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1) APPELLATE JURISDICTION
Morris & Morris [2023] FedCFamC1A 193
Appeal from: Morris & Morris (No 3) [2023] FedCFamC1F 927 Appeal number(s): NAA 295 of 2023 File number(s): SYC 4955 of 2021 Judgment of: ALDRIDGE, CAREW & CURRAN JJ Date of judgment: 10 November 2023 Catchwords: FAMILY LAW – LEAVE TO APPEAL – Where the order to which the appeal relates is interlocutory – Where the primary judge found that legal professional privilege had been waived in relation to documents produced pursuant to subpoena – Where the Full Court is not persuaded that the decision of the primary judge is attended by sufficient doubt to warrant it being reconsidered – Leave to appeal refused – Costs ordered in favour of the respondent in the fixed sum of $19,800. Legislation: Family Law Act 1975 (Cth) ss 79, 106B
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 28(3)(e)(i)
Trans-Tasman Proceedings Act 2010 (Cth)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 6.01
Cases cited: Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46
Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66
Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34
Porter v Byrne (2009) 40 Fam LR 644; [2009] FamCAFC 8
Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52
The Queensland Local Government Superannuation Board v Allen [2016] QCA 325
Number of paragraphs: 50 Date of hearing: 3 November 2023 Place: Sydney Counsel for the Appellant: Mr Smallbone Solicitor for the Appellant: Prime Lawyers Counsel for the Respondent: Mr Richardson SC with Mr Hollo Solicitor for the Respondent: Barkus Doolan Winning ORDER
NAA 295 of 2023
SYC 4955 of 2021FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR MORRIS
Appellant
AND: MS MORRIS
Respondent
ORDER MADE BY:
ALDRIDGE, CAREW & CURRAN JJ
DATE OF ORDER:
3 NOVEMBER 2023
ON 3 NOVEMBER 2023 THE COURT ORDERED THAT:
1.Leave to appeal is refused.
2.The appeal is dismissed.
3.The appellant will pay the costs of the respondent fixed in the sum of $19,800 within 28 days of today.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Morris & Morris has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALDRIDGE, CAREW & CURRAN JJ
On 30 October 2023, a judge of the Federal Circuit and Family Court of Australia (Division 1) dismissed a Notice of Objection to a subpoena to produce documents having found that although legal professional privilege applied, it had been waived. A Notice of Appeal was filed on 31 October 2023 and listed urgently because the hearing of the substantive proceedings had already commenced before another judge of this Court on 30 October 2023. A stay was granted pending determination of the appeal.
At the conclusion of the hearing on 3 November 2023, leave to appeal was refused with reasons reserved. These are the reasons.
As the order made on 30 October 2023 was interlocutory, leave to appeal is required.[1]
[1] Federal Circuit and Family Court of Australia Act 2021 (Cth) s 28(3)(e)(i).
The applicable test to determine whether leave to appeal should be granted is a conjunctive one, namely, “whether, in all of the circumstances, the decision is attended by sufficient doubt to warrant it being reconsidered by the Full Court and whether a substantial injustice would result if leave were refused, supposing the decision to be wrong”[2] (emphasis in original).
[2] Medlow & Medlow (2016) FLC 93-692 at [55]–[57].
It will be helpful to firstly set out some background.
BACKGROUND
The substantive proceedings are between the applicant (“the husband”) and the respondent (“the wife”) and others and concern a property settlement application pursuant to s 79 of the Family Law Act 1975 (Cth).
The husband is 70 years of age, and the wife is 66 years of age. The husband and wife commenced cohabitation in 1997 and married in 1999. They separated in March 2021. There are no children of the relationship, but the wife has three adult children from a prior marriage. The wife suffered a stroke in mid 2021.
The wife commenced the proceedings in July 2021.
It is uncontroversial that in late 2021, the husband transferred a large number of shares held by him personally in a publicly listed company, B Limited, to D2 Limited, a company incorporated in New Zealand some two weeks earlier (“the share transfer”). The shares were transferred for no consideration in an off-market trade. The shares had a significant value at the time of transfer.
B Limited is a well-established Australian owned and operated, Australian Securities Exchange (“ASX”) listed company. The husband is the chairman and Chief Executive Officer of B Limited.
D2 Limited is the second respondent in the substantive proceedings and admitted by the husband to be his alter ego. The directors of D2 Limited are the husband and Mr X, the husband’s accountant. The shareholders of D2 Limited are F Limited and E Limited with each holding 100 of the 200 issued shares. F Limited and E Limited hold their shares on trust for the D Trust. F Limited and E Limited are the joint trustees of the D Trust.
F Limited was incorporated in New Zealand in 1999 and the sole director and sole shareholder is Mr X. The husband denies that he controls and directs Mr X and denies that F Limited is his alter ego.
F Limited as trustee for the D Trust is the third respondent.
E Limited was incorporated in New Zealand in 1999 and the sole director and sole shareholder is the husband. E Limited is the husband’s alter ego.
E Limited as trustee for the D Trust is the fourth respondent.
The D Trust was established in 1999 and is a discretionary trust. The husband is the only living discretionary beneficiary. The husband is the appointor of the trust. The current trustees of the trust have the power to apply and pay all or any of the net income of the trust, and to pay, apply or transfer the whole or any part of the capital of the trust for the benefit of the husband.
In late 2021, the husband represented to the ASX and the public that the share transfer was an internal transfer by him to an associated entity for commercial, estate and charitable purposes.
In an affidavit filed in this Court on 29 January 2022 (“the affidavit”) the husband stated:
17.I presently control […] [B Limited] shares with a book value of […] at today’s list price […]. [In late] 2021 I transferred [a large number of] shares held in my personal name to a company I control ‘[D2] Limited’, which is a company incorporated in New Zealand. My solicitors notified my wife’s solicitors of the transfer of shares. The transfer was made for accounting and estate planning purposes.
The last sentence of paragraph 17 of the affidavit assumed some significance in the current dispute.
The affidavit was prepared in response to the wife’s Amended Application in a Proceeding filed 23 November 2021 and her affidavit in support filed the same day in which she contended, among other things, at paragraph 138, that the husband had been obstructive in respect of disclosure and that he had failed to make full and frank disclosure of all matters in relation to the ascertainment of his financial position. The husband’s affidavit also responded to the wife’s amended case outline filed 1 December 2021, which at paragraph 38.23 made allegations against the husband including that he had refused to comply with orders, had withdrawn large sums of money, and had failed to make full and frank disclosure.
It is pertinent to note that parties to proceedings in this Court have a duty to give full and frank disclosure of all information relevant to the proceedings in a timely manner.[3] This obligation commences from the start of the proceeding and continues until it is finalised.[4] Additionally, when determining whether or not it is just and equitable to make an order pursuant to s 79 the Court must first identify, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in property.[5]
[3] Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 6.01.
[4] Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 6.01.
[5] Stanford v Stanford (2012) 247 CLR 108 at 120.
One day prior to the transfer, the husband, through his lawyers, notified the wife of the share transfer.
In early 2022, the wife’s lawyers responded, and, among other things, posed a series of questions about the share transfer including the following:
(a)What was the commercial rationale for the transfer of shares in B Limited?
(b)Why was there no consideration paid for the transfer?
(c)Was any advice obtained as to the commercial or tax ramifications of the transfer? If so, please provide copies;
(d)Please advise the husband's assessment of the impact, if any, on the market price of shares in the company as a result of the transfer. Are there any other factors the husband is aware of which affected, or may have affected, movements in the share price between the date of announcement of the transfer and now?
Following that, the husband represented to the wife that the share transfer was made for accounting and estate planning purposes.
The matter has proceeded by way of pleadings with the wife filing Points of Claim on 6 June 2023 and the husband filing Points of Defence on 3 July 2023.
At paragraph 20 and 21 of the Points of Claim the wife contends:
20. By reason of the facts and matters contended at paragraphs 2 to 5 and 6 to 13 above, the Husband:
•is the sole person who can obtain or effect the obtaining of a beneficial interest in the property of the [D] Trust;
•has effective control and direction of the Trustees of the [D] Trust;
•is vested with the power to remove and appoint the Trustees of the [D] Trust, including to appoint himself as Trustee.
21. In the circumstances set out in paragraph 20 above, all property of the [D] Trust, including [D2 Limited] and all property which it holds, is property of the Husband for the purposes of s 79 of the Act.
At paragraphs 25 and 26 of the Points of Claim, the wife pleads an alternative claim to set aside the share transfer pursuant to s 106B of the Family Law Act 1975 (Cth) and at paragraph 27 contends:
27. The Share Transfer was made in order to defeat the orders sought by the wife in the proceedings.
At paragraphs 4, 5 and 8 of the Points of Defence, the husband contends:
4. The First Respondent denies paragraphs 21 but admits that the following assets are property of the First Respondent:
•His right as discretionary beneficiary to due administration of the [D] Trust;
•His powers of appointment described in paragraphs 9, 10 and 11 of the Points of Claim; and
•His shares in the Fourth Respondent.
5.In the premises referred to in paragraphs 4(a), (b) and (c) above, the First Respondent says that subject to the inherent legal and constitutional limitations on the scope of the powers in sections 79 and 80 and Pt. VIIIAA of the Family Law Act, the Court’s powers extend to the making of orders controlling or directing the First Respondent’s exercise of his powers, use and disposition of his property referred to in paragraphs 4(a), (b) and (c) above in such manner as may be necessary to give effect to such alteration of property rights, if any, as the Court determines to be just and equitable.
…
8.In further answer to the whole of the Points of Claim, the First Respondent says that:
•the Share Transfer was made to provide an income producing asset sufficient to be capable of funding the ongoing activities on a permanent basis of the [D] Trust, being the business of producing a [motor vehicle], and in exploiting such vehicle in the business of […] sport, and for the acquisition and improvement of assets incidental to that purpose, including the improvement of land for that purpose at [Suburb Q property] in New Zealand,
•the intended and actual prosecution of that business was made known by the First Respondent to and was accepted by the Applicant many years ago and has been pursued by the Respondents without objection from her at any time, and is a purpose which she did not at the time of the disposition have, nor has she ever had, any actual or reasonable expectation of disturbing,
•in those circumstances the Share Transfer was a reasonable, proper and legitimate disposition which the First Respondent had every right to make, and
•for those purposes it was the actual intention of each of the First Respondent and the Second to Fourth Respondents, to add the transferred shares to the trust property held on the terms of the [D] Trust
On 4 October 2023, a subpoena issued, at the request of the wife to Y Accountants was served in New Zealand pursuant to provisions of the Trans-Tasman Proceedings Act 2010 (Cth). The subpoena sought the production of various documents relating to the share transfer and the advice received by the husband in relation thereto. Six documents have been produced in answer to the subpoena as follows:
(a)A letter of advice dated late 2021 prepared by Mr CC and sent by Y Accountants on or about that day to the husband;
(b)An email prepared by Mr CC and sent in late 2021 to Mr DD and copied to Mr EE;
(c)An email from Ms FF of GG Firm, to Mr EE in late 2021, enclosing a written advice from Mr DD;
(d)Three tax invoices from Y Accountants to the husband dated late 2021;
The primary judge found that documents (a), (b), and (c) were subject to legal professional privilege but dismissed the objection on the basis that privilege had been impliedly waived. The primary judge dismissed the objection in relation to the tax invoices which relied on relevance. The husband conceded that if his challenge to the order in relation to documents (a), (b) and (c) failed so would his challenge to the tax invoices.
WHAT ARE THE PROPOSED GROUNDS OF APPEAL IF LEAVE IS GRANTED?
If granted leave, the husband’s proposed grounds of appeal are as follows:
(1)The learned primary judge erred in finding that the appellant by paragraph 17 of his affidavit affirmed 29 January 2022 waived privilege in the otherwise privileged documents.
(2)Consequentially on that finding, the learned primary judge erred in finding that certain invoices were relevant to a fact in issue.
THE DECISION OF THE PRIMARY JUDGE
The primary judge delivered ex tempore reasons shortly after the hearing. In such circumstances, it can be appropriate to make certain assumptions in favour of the judgment e.g., that evidence not specifically referred to or analysed is unlikely to have been overlooked given the freshness of the reasons.[6]
[6] Porter v Byrne (2009) 40 Fam LR 644 at 653 per Warnick J quoting a paper entitled “Practical Impediments to the Fulfilment of Judicial Duties” published in The Judicial Review Vol 6 number 4, Heydon J.
The primary judge identified, correctly with respect, the applicable legal principles by reference to the authorities, including the two leading High Court authorities of Mann v Carnell,[7] and Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd[8] (“Expense Reduction”).
[7] (1999) 201 CLR 1.
[8] (2013) 250 CLR 303.
The High Court described the applicable principles in Mann v Carnell as follows:
28.... It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege. …
29.Waiver may be express or implied. … What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.
In Expense Reduction, the High Court described the applicable principles as follows:
30.According to its strict legal connotation, waiver is an intentional act done with knowledge whereby a person abandons a right (or privilege) by acting in a manner inconsistent with that right (or privilege). It may be express or implied. In most cases concerning waiver, the area of dispute is whether it is to be implied. In some cases waiver will be imputed by the law with the consequence that a privilege is lost, even though that consequence was not intended by the party losing the privilege. The courts will impute an intention where the actions of a party are plainly inconsistent with the maintenance of the confidentiality which the privilege is intended to protect.
31.In Craine v Colonial Mutual Fire Insurance Co Ltd, it was explained that “‘[w]aiver’ is a doctrine of some arbitrariness introduced by the law to prevent a man in certain circumstances from taking up two inconsistent positions … It is a conclusion of law when the necessary facts are established. It looks, however, chiefly to the conduct and position of the person who is said to have waived, in order to see whether he has ‘approbated’ so as to prevent him from ‘reprobating’”. In Mann v Carnell, it was said that it is considerations of fairness which inform the court’s view about an inconsistency which may be seen between the conduct of a party and the maintenance of confidentiality, though “not some overriding principle of fairness operating at large”.
In the application of the legal principles to the facts in this case, the primary judge made the following relevant findings at [1] and [44]:
(a)One of the issues in the proceedings is the circumstances, reasons why and for what purpose the husband caused the transfer of shares in a publicly listed company from his name to another company as trustee for a trust;
(b)It is clear that legal advice was obtained at the time of the transfer;
(c)The husband, by the statement in his affidavit (that “[t]he transfer was made for accounting and estate planning purposes”), had put in issue his state of mind as to the reasons for the transfer;
(d)The legal advice provided by Mr CC was relevant or likely relevant to the husband’s state of mind.
There was no challenge to those findings.
The primary judge concluded that there had been an implied waiver of privilege in relation to the documents in contention and at [45]–[49] said:
(a)Having deployed “accounting and estate planning” as the purpose of the transfer and thereby raising the issue of state of mind to which the legal advice is likely to have contributed, the husband cannot maintain the privilege;
(b)The husband’s voluntary actions are inconsistent with the maintenance of the confidentiality which the privilege had intended to protect;
(c)The maintenance of the privilege would prevent the wife from being able to test the allegation. That is forensically unfair in the Mann v Carnell sense;
(d)A waiver can arise either by cause of action or defence;
(e)The husband has waived privilege to the documents the subject of the subpoena;
(f)The tax invoices could have apparent relevance to the issues in the proceedings.
THE HUSBAND’S CHALLENGE TO THE DECISION
The gravamen of the husband’s challenge to the decision is that the primary judge “equated putting in issue a state of mind to which legal advice was likely to be relevant with inconsistency with the maintenance of confidentiality” and that “[m]ore is required” (appellant’s Summary of Argument filed 1 November 2023, paragraph 3).
It was submitted by counsel for the husband that at the time of the affidavit, the husband was simply responding to a complaint about disclosure. There was no issue in dispute for which his state of mind could create an inconsistency in the relevant sense. The wife’s claim to set aside the share transfer had not been formulated in an application and there were no pleadings asserting the share transfer was done to defeat the wife’s property claim. That came later and then in response to that claim the husband simply denied the allegation. The husband did not raise, as part of his case, the contents of the privileged material either directly or indirectly.
IS THE DECISION ATTENDED BY SUFFICIENT DOUBT?
Several cases have undertaken an extensive review of relevant authorities. One such case is The Queensland Local Government Superannuation Board v Allen,[9] a decision of the Queensland Court of Appeal, and we respectfully adopt the summary set out below:
[9] [2016] QCA 325 (per Burns J with McMurdo P and Philippides JA agreeing).
[69] The decisions just examined inform the following summary of the principles applicable to a determination as to whether legal professional privilege has been impliedly waived:
(a)a person may waive privilege without intending that result; the test is objective and privilege may be waived regardless of the subjective intention of the privilege holder;
(b)privilege will be waived where the conduct of the privilege holder is inconsistent with the maintenance of confidentiality in the communication which the privilege would otherwise protect;
(c)the focus is on the conduct of the privilege holder, not the party attempting to destroy the privilege;
(d)whether there is relevant inconsistency is to be evaluated in accordance with the context and circumstances of the case and in the light of any considerations of fairness arising from that context and those circumstances;
(e)the privilege will not be lost merely because there has been a reference by the privilege holder to the privileged communication in a pleading or an affidavit, although it will be lost if the advice is reproduced in full in the pleading or affidavit;
(f)whether a limited disclosure of the existence, and the effect, of legal advice is inconsistent with maintaining confidentiality in the terms of the advice as a whole so as to amount to an implied waiver with respect to the whole of the advice will again depend on the context and circumstances of the case;
(g)in such cases, the context can include the nature of the matter in respect of which the advice was received, the evident purpose behind making the relevant disclosure and the legal and practical consequences of limited rather than complete disclosure;
(h)where there has been disclosure of a privileged communication contained in the document, and the document deals with a single subject-matter, it will be unfair to allow a party to use part of the document and claim privilege as to the remainder; at least so far as the document concerns the same subject-matter.
[70]In the application of the above principles to a given case, the court must analyse the acts or omissions of the privilege holder that are said to be inconsistent with the maintenance of privilege in the relevant communication. Because the result of any such analysis will turn on the particular context and circumstances of the case at hand, other cases in which implied waiver has been considered provide only limited assistance. Nonetheless, some broad themes have emerged from the case law in relation to particular kinds of conduct. One of those themes concerns what is sometimes referred to as “issue waiver”, that is to say, conduct in connection with the prosecution or defence of a litigated claim by reason whereof an otherwise privileged communication is put in issue. That may be because the privilege holder has advanced a claim, mounted a defence or in some other way placed reliance on the privileged communication to advance its interests in the litigation.
[71] In cases of this kind, it has been held that where “the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication”, the privilege in the communication will be waived. It has also been held that it “is not apparently open to another party to litigation to force waiver of a party’s legal professional privilege by making assertions about, or seeking to put in issue, that party’s state of mind”. Indeed, that is just another way of saying that implied waiver can only come about through the acts or omissions of the privilege holder, and not the party seeking to destroy the privilege. Waiver cannot be contrived by such a party, whether by the contents of that party’s pleading or otherwise. Lastly, it has been held that the question is not whether the privilege holder has put their state of mind in issue in the proceeding but whether the contents of an otherwise privileged communication have either directly or indirectly been put in issue by the privilege holder. That may occur where a party pleads reliance on the contents of legal advice to justify a claimed state of mind but it will not occur where the party is merely joining issue with an allegation made by the opposing party that he, she or it possessed a particular state of mind. The “mere fact that a party pleads a cause of action that includes their state of mind as a material fact, or otherwise puts their state of mind in issue in the proceedings, does not necessarily give rise to an implied waiver in respect of legal advice that may have been received by the party, even if that legal advice may be relevant to the party’s state of mind”. In the end, the question is whether, as part of the privilege holder’s case, an assertion has been made that lays open the privileged communication to scrutiny, with the consequence that an inconsistency arises between the making of the assertion and the maintenance of the privilege.
(footnotes omitted)
In his reasons, the primary judge identified paragraph 17 of the affidavit as being inconsistent with the maintenance of privilege in circumstances where one of the issues in the substantive proceedings was “the circumstances, reasons why and for what purpose the husband caused the transfer of shares in a publicly listed company from his name to another company as trustee for a trust”. However, paragraph 17 was not the only occasion that the husband propounded a positive case as to his reasons for the share transfer.
The husband’s letter to ASX and the public in late 2021 stated that the share transfer had been for commercial, estate and charitable purposes. In early 2022 the husband again represented to the wife that the share transfer had been made for accounting and estate planning purposes. In paragraph 8 of the Points of Defence the husband stated that the share transfer had been made:
… to provide an income producing asset sufficient to be capable of funding the ongoing activities on a permanent basis of the [D] Trust, being the business of producing a [motor vehicle], and in exploiting such vehicle in the business of […] sport, and for the acquisition and improvement of assets incidental to that purpose, including the improvement of land for that purpose at [Suburb Q property] in New Zealand,
These repeated statements by the husband arguably seek to vindicate his actions in making the share transfer and add a further context to the inconsistency and unfairness of the husband maintaining the privilege.
The submission that the share transfer was not an issue until the filing of the wife’s Points of Claim is not sustainable. Indeed, it is difficult to envisage a circumstance in property settlement proceedings where a unilateral transfer of shares with significant value for no consideration would not be an issue, but in our view, the wife’s letter dated early 2022 specifically made it an issue.
In raising his state of mind at the time of the share transfer, the husband necessarily opened to scrutiny the legal advice he had received prior to the share transfer. The husband’s conduct created an inconsistency between his voluntary actions of raising his state of mind about an issue in the proceedings and the maintenance of privilege, informed by the forensic unfairness of allowing the proceedings to proceed without the wife having the opportunity to inspect the privileged material.
DISPOSITION
We are not persuaded that the decision of the primary judge is attended by sufficient doubt to warrant it being reconsidered by this Court.
The husband conceded that if leave were not granted on the privilege ground there would be no basis to challenge the dismissal of the objection relating to the tax invoices.
Accordingly, leave to appeal is refused.
COSTS
As the husband has been wholly unsuccessful, he should pay the wife’s costs of the appeal on a party and party basis fixed in the sum of $19,800. There was no challenge to the quantum.
I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Aldridge, Carew & Curran. Associate:
Dated: 10 November 2023
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