P and P
[2005] FCWA 34
•16 MARCH 2005
JURISDICTION:
FAMILY COURT OF WESTERN AUSTRALIA
| ACT: | FAMILY LAW ACT 1975 |
| LOCATION: | PERTH |
| CITATION: | P and P [2005] FCWA 34 |
| CORAM: | HOLDEN CJ |
| HEARD: | 24 FEBRUARY 2005 |
| DELIVERED: | 16 MARCH 2005 |
| FILE NO/S: | PT 578 of 2003 |
| BETWEEN: | P |
Applicant/ Wife
AND
P
Respondent/ Husband
W PTY LTD TRUSTEE FOR PW TRUST
Second Respondent
Catchwords:
PROPERTY - interlocutory proceedings - third party production of documents for inspection for the purpose of establishing an interest under a trust and the value of that interest - relevance - right of trustees to refuse to disclose documents to the beneficiaries of a trust
Legislation:
Family Law Act 1975 s 90AA, 90AC
Category: Not Reportable
Representation:
Counsel:
| Applicant Wife: | Mr K Wilson SC |
| Respondent Husband: | Ms H Athanasiou |
| Second Respondent: | Mr P Dowding SC |
Solicitors:
| Applicant Wife: | O'Sullivan Davies |
| Respondent Husband: | Ferrier Athanasiou & Kakulas |
| Second Respondent: | Mizen & Mizen |
Case(s) referred to in judgment(s):
Nil
1 Before me for determination is the interlocutory application of the wife filed on 30 December 2004 as amended by a minute handed up on the day of the hearing before me on 24 February
2005. By that application the wife sought the following orders: 1. That W Pty Ltd as trustee for the P W Trust (“the second respondent”) make available for inspection by the wife and her advisors in these proceedings, the following documents:
(a)
The Deed for the P W Trust (“PWT”) and all memoranda endorsed on the Deed in accordance with its terms.
(b)
All notices provided to the guardians of PWT by the trustee of PWT from 1 January 2000 onwards.
(c)
All documents recording the terms of proposed amendments to PWT and the reasons for the proposed amendments from 1 January 2000 onwards.
(d)
The consolidated accounts prepared for PWT in accordance with cl. E4 of the PWT Trust Deed to include:
| · | a balance sheet |
| · | a statement of income and expenditure |
| · | a list of assets held at the close of each accounting period |
| · | the names and addresses of all persons or firms having custody of |
all or any portion of the assets of the PWT Trust
| · | the report of any auditor appointed to audit the accounts for any |
relevant accounting period
from 1 January 2000 onwards.
(e)
The most recent set of accounts (consolidated or otherwise) in the possession or control of the Trustee of PWT in respect of any entity in which PWT has a direct or indirect interest.
(f)
A record of the distributions made by PWT, or the documents recording such distributions from 1 January 2000 onward.
(g)
The Articles of Association, Memorandum of Incorporation or Constitution of W Pty Ltd, together with documents evidencing any change to or variation of those Articles of Association, Memorandum of Incorporation or Constitution.
(h)
Minutes of the meetings of the Directors of W Pty Ltd from 1 January 2000 onwards.
2. The documents in paragraph 1 be available for inspection at the office of Mizen and Mizen, 69 Mount Street, Perth on or before 3 March 2005 between 9am to 5pm Monday to Friday with the applicant wife’s advisors being at liberty to copy any document by photocopy or scanner or a combination of both.
3. The husband and/or W Pty Ltd as trustee for the W P Trust pay the applicant wife’s costs of and incidental to this application.
4. Such other orders as the Court deems fit.
2 The application is opposed by the second respondent.
3 The context in which this application arises is that there are defended property proceedings between the husband and the wife. On 14 March 2003 the respondent husband filed a statement of his financial circumstances. In paragraph 52 of that document, by which the husband was to reveal any interest that he had in any trust or deceased estate, he said “Possible beneficiary in the P W Trust”. He claimed that he did not know the value of his interest, if any, in that Trust. He made the same statement in a further Form 13 Financial Statement, which was filed on 28 April 2004.
4 The wife has been seeking further information with respect to the respondent husband’s interest in the P W Trust.
5 By a letter dated 16 July 2004 from the respondent husband’s previous solicitors to the applicant wife’s solicitors, the following was stated:
“5.
All documents within our client’s control have been provided and/or can be found in his Form 25 Affidavit of Documents and the Supplemental List enclosed with this letter. He is unable to obtain “the consent of any third parties” in relation to documents of the P Group and/or the W Trust, as per the Minute of Consent Orders made 5 May 2004. Despite the submissions you made when the matter was last before the Court, Mr Scott P cannot access the material you seek to inspect as it is not material which is normally in his possession, nor is it information to which he is entitled.
6.
We enclose a further copy of a letter from Mizen & Mizen, Barristers & Solicitors, who act for the W Trust and the P Group of Companies, dated 17 May, 2004 which was annexed to our client’s affidavit sworn 21 May 2004. We would draw your attention to the contents of the last paragraph of that letter and suggest that you address your requests to that firm as requested in that letter. Your request should be directed to the Trustees of the W Trust, in writing and legally specific.”
6 By a letter dated 8 November 2004, the second respondent's solicitors, Mizen and Mizen wrote to the applicant wife’s solicitors in the following terms:
“We refer to your letter of 18 October 2004 and the Form 12 Non-Party Production of Documents dated 11 October 2004 which was served on us on 19 October 2004.
Pursuant to Rule 13.39 of the Family Law Rules 2004 please take notice that our client objects to the production of all of the documents set out in your client’s Notice on the following grounds…”
7 The letter goes on to state three categories of objections. They
are:
(a) relevance; (b) the husband has been provided documents, some of the documents by W Pty Ltd and that therefore the request for non-party production is in breach of Rule 13.33(2) which provides that a Form 12 may be served only if there is no other reasonably simple and inexpensive way of proving the issue sought to be proved by the document specified in the form. (c) That in the case of many of the documents, no beneficiary of the PWT is entitled to the documents and therefore, the husband has no entitlement to them.
8 Then in a letter dated 1 October 2004 from the respondent husband’s solicitors to the applicant wife’s solicitors, it was stated: “We refer to your second substantive letter dated the 2nd September and confirm our client’s position in relation to documents that your client wishes to access from third parties. We are instructed to make strenuous objection in relation to the alleged failure on our client’s part to arrange for documents to be available from the P Group. Your letter mistakenly and wrongly concludes that our client has any control over the documents. We confirm and adopt the position as outlined in a letter to yourselves from F.M. Brennan & Associates dated 29 July 2004.”
9 Then on 26 November 2004 the applicant wife’s solicitors wrote to the respondent husband’s solicitors in the following terms:
“In relation to your client’s foreshadowed application about obtaining documents from the trustee of the W Family Trust, you will appreciate that to join with our client in such an application may cause some friction with our client and his family. However, we have instructions to neither consent nor oppose an application that would be made by your client in that regard.”
10 Notwithstanding, senior counsel for the second respondent’s submission from the Bar Table that some of the documents are in the husband’s possession, he maintains the position that he is apparently unable to produce the documents for inspection by the applicant wife’s advisors.
11 Again, for the sake of putting the scope of the dispute into context, the applicant wife is in possession of a document which purports to list the P Group Assets as at 2 February 2001. The group is made up of nine different companies and the document shows the value of the assets held by those companies to be $78,250,000 which includes $17,420,000 held by PWT.
Applicable rules
12 This application is brought pursuant to the provisions of Chapter 13, Part 13.4, Division 13.4.2 of the Family Law Rules 2004. Rule 13.33 provides:
“13.33(1) simple and inexpensive way of proving the issue sought to be proved by the document specified in the Form.”
A requesting party may serve a Notice of Non-party
Production of Documents (Form 12) on a non-party, requiring
the non-party to produce to the requesting party a specified
document or class of documents:
(a) relevant to an issue in the case;
(b) in the possession, or under the control, of the non-party;
and
(c) that the non-party may be required to produce at the trial.
13.33(2)
| 13 | Rule 13.39 provides: “A person who may be affected by the production of some or all of the documents specified in a Form 12 may, within 21 days of being served with the Form, object to the production of those documents by serving the following people with an objection in accordance with Part G of Form 12: (a) the requesting party; (b) the non-party named in the Form.” |
| 14 | Rule 13.41(1)(b) provides: “(b) a person makes an objection under rule 13.39” |
Determination
15 I am satisfied that the requirements of Rule 13.33 have been satisfied. In my view, the documents being requested are clearly relevant to an issue in the case between the respondent husband and the applicant wife, namely, the nature of and extent of the husband’s interest in the W Trust. The second respondent, with the exception of auditors’ reports, has not suggested that they do not have the documents in their possession or under their control and it was not argued that they may be required to produce them at trial.
16 Senior counsel for the second respondent relies on Rule 13.33(2) to support his submission that the applicant wife ought to be seeking to obtain the documents from the respondent husband rather than the second respondent. I do not accept that submission for the following reasons:
(a)
The applicant wife has clearly made significant efforts to gain production of the documents;
(b)
The husband has failed to produce the documents for inspection and maintains, and has apparently maintained throughout, that he is not entitled to possession of many of the documents; and
(c)
the Rule does not provide that there must not be any other reasonably simple and inexpensive way of obtaining the documents, but rather it provides that there must be “no other reasonably simple and inexpensive way of proving the issue sought to be proved by the document[s] specified in the Form.”
17 Returning momentarily to the issue of relevance, there is an issue as to whether or not the husband’s interest in the P W Trust is a vested interest. In this regard, I refer to paragraph 22 to 34 of the written submissions of the solicitors for the applicant wife filed on 24 January 2005.
18 This brings me to what I regard as the real crux of the dispute between the applicant wife and the second respondent. By written submissions, the solicitors for the second respondent indicate which documents are in dispute, so far as the second respondent is concerned and those are the subject of the applicant wife’s application. They are as follows:
(a) Documents in categories 1(c), (e) and (h) of the applicant wife’s application; and (b) documents in category 1(f) of the applicant wife’s application in relation to distributions made to any party other than the respondent husband.
19 In due course I intend to adjourn that part of the application dealing with category 1(f) as these distributions have historically been shown in the financial statement of the P W Trust as is evidenced, for example, by the financial statements for the year ended 30 June 2002. If the subsequent years’ financial statements do not reveal distributions to other beneficiaries, then the applicant wife can have leave to re-list the application. The argument advanced by senior counsel for the second respondent is essentially that many of the documents being sought fall into a category to which the beneficiaries of the trust are not entitled and that, therefore, it would be inappropriate to put the applicant wife in a higher position than a beneficiary. In support of his proposition, he relies principally on two cases, namely, Crowe v Stevedoring Employees Retirement Fund Pty Ltd [2003] VSC 316 and Rouse v IOOF Australia Trustees Ltd (1999) 73 SASR 484; [1999] SASC 181. The passage that senior counsel for the second respondent referred me to in Crowe is, in fact, passages from the decision of the English Court of Appeal in Re Londonderry’s Settlement [1965] 1 Ch 918. Counsel specifically referred me to paragraph 25 of the Crowe judgment where the following appears:
“Dr Hardingham’s principal submission in this context relied on the decision of the English Court of Appeal in Re Londonderry’s Settlement to the effect that trustees exercising a discretionary power are not bound to disclose to the beneficiaries their reasons for exercising that power, and accordingly are not bound to disclose agendas, minutes and other documents prepared for their meetings. Harman LJ said that the principle that trustees are not bound to disclose reasons for their decisions:
‘rests largely I think on the view that nobody can be called upon to accept the trusteeship involving the exercise of a discretion unless, in the absence of bad faith, he were not liable to have his motives or his reasons called in question either by the beneficiaries or by the Court.’
His Lordship later referred to the trial judge having:
‘felt the strength of the trustees’ submission that it was undesirable to wash family linen in public which would be productive only of family strife and also odium for the trustees and embarrassment in the performance of their duties.’
This point was taken up by Danckwerts LJ who said:
‘It seems to me there must be cases in which documents in the hands of trustees ought not to be disclosed to any of the beneficiaries who desire to see them, and I think the point was a good one which was taken in the affidavit of Lord Nathan, that to disclose such documents might cause infinite trouble in the family, out of all proportion to the benefit which might be received from the inspection of the same. It seems to me that where trustees are given discretionary trusts which involve a decision upon matters between beneficiaries, viewing the merits and other rights to benefit under such a trust, the trusts are given a confidential role and they cannot properly exercise that confidential role if at any moment there is likely to be an investigation for the purpose of seeing whether they have exercised their discretion in the best possible manner.’
And Salmon LJ made a similar point saying:
‘Nothing would be more likely to embitter family feelings and the relationship between the trustees and members of the family, were trustees obliged to state their reasons for the exercise of the powers entrusted to them. It might indeed well be difficult to persuade any persons to act as trustees were a duty to disclose their reasons, with all the embarrassment, arguments and quarrels that might ensue,
added to their present not inconsiderable burdens.’”
[footnotes omitted]
20 Later in his judgment Balmford J expressed the view that the law in this country was governed by the decision of the majority of the New South Wales Court of Appeal in Hartigan Nominees v Rydge (1992) 29 NSWLR 405.
21 In that case, and referring to the Full Court of the Supreme Court of Queensland decision in Tierney v King [1983] 2 Qd RA 580, Sheller JA said as follows:
“With respect I doubt whether actuarial reports obtained by trustees are documents which evidence the reasons why trustees have made their decisions any more than are trust accounts or opinions from counsel or indeed any other material obtained by trustees to assist them in administering the trust. What is restricted is, I think, access to documents which are of a class which would or might reveal the reasoning process of the trustees.”
22 In relation to Re Londonderry’ Settlement (supra), he went on
to say:
“I think material upon which reasons were or might have been based cannot generally be withheld, unless it reveals the reasons themselves or the reasoning process. In Jacobs’ Law of Trusts in Australia, 5th ed (1986) para1716 at 393, referring to the Londonderry’s Settlement case the learned authors say:
…Nevertheless, this case is clear authority that beneficiaries have no right to see documents private to the trustees which may evidence the reasons why the trustees have made their decisions.
This statement, in my opinion, accurately describes the nature beneficiaries are denied access should be extended beyond those the non-disclosure of which is necessary to preserve the trustees' right not to disclose their reasons for exercising discretionary powers and their reasoning processes.
of documents access to which by beneficiaries is denied.
…
23 Senior counsel for the second respondent referred me to paragraph [101] and [103] of the judgment of Doyle CJ in Rouse (supra). In my view, however, to put those paragraphs in their proper context it is necessary to quote more extensively from that judgment. Doyle CJ said:
"[100] There must be various situations in which a trustee, particularly a trustee conducting a business, would be put in an impossible position if the beneficiary of the trust could, as a matter of right, claim to inspect documents in the possession of the trustee and relevant to the conduct of the business. It is readily conceivable that there will be situations in which an undertaking of confidentiality is not sufficient protection. The fact that the trust is one in which numerous beneficiaries have an interest, and the further fact that those beneficiaries may have differing views about the wisdom of the course of action being pursued by the trustee, only serve to emphasise, in my opinion, the need for the law to recognise some scope for a trustee to refuse to disclose information on the grounds that it is confidential and on the further ground that the disclosure is not in the interests of the beneficiaries as a whole. I make that observation on the basis and on the assumption that the ultimate right of the beneficiaries will be to have the trustee removed if they are dissatisfied with the approach of the trustee.
[101] Ultimately, I would rest the existence of the relevant discretion upon the need to reconcile the undoubted duty of a trustee to make disclosure to beneficiaries of information about the trust, and the undoubted duty to permit the inspection of trust accounts and trust documents, with the equally fundamental obligation of a trustee to conduct the affairs of a trust, and particularly a trust which involves the conduct or management of a business, in the interests of the beneficiaries as a whole. I consider that on occasions the reconciliation of these interests may entitle a trustee to decline to provide information to particular beneficiaries, when the trustee has reasonable grounds for considering that to do so will not be in the interests of the beneficiaries as a whole, and will be prejudicial to the ability of the trustee to discharge its obligations under the trust. It may be that the ultimate foundation of the discretion is the obligation of the trustee to discharge its duties to manage the affairs of the trust in the interests of the beneficiaries.
[102] I wish to make it clear that the discretion that I envisage is a limited one, and must always be limited by the general duty of disclosure by a trustee to which I have referred. The existence of the discretion cannot be used as an excuse for paternalism or to disregard the interests of beneficiaries. Its existence depends upon the need to protect the trustee’s ability to discharge its obligations. The availability of the discretion will depend very much upon the circumstances of the particular case.
[103] I therefore conclude that the right of a beneficiary to inspect trust documents is qualified by the existence of the discretion to which I have referred. It is impossible and pointless to state the scope of the discretion with any precision. All that can be said is that there may be circumstances in which the trustee can properly claim that there are trust documents of a confidential nature that a trustee may refuse to disclose to particular beneficiaries in the interests of the discharge of the trustee’s duties to the beneficiaries as a whole. Once again, lest I should be misunderstood, there is one other qualification that I would make. I do not, in what I have said, contemplate the use of that discretion to enable a trustee to deal in a partial or discriminatory manner as between beneficiaries or groups of beneficiaries, except to the extent that the necessary result of a proper exercise of the discretion may be that particular beneficiaries are not given access to a document.
[104] Having reached the conclusion that I have reached, the third of the issues identified by me arises for decision. That is, whether in the circumstances as described by me IOOF was entitled to refuse to permit inspection of the documents in question."
24 The effect of the authorities to which I have been referred is, in my view, to emphasise the very limited right of trustees to refuse to disclose documents to the beneficiaries of a trust. It seems to me that right is limited to cases where:
(a) the documents would reveal the reasoning adopted by the trustees for the making of a particular decision; (b) where the trustee has reasonable grounds for considering that to do so will not be in the interests of the beneficiaries as a whole; or (c) it would be prejudicial to the ability of the trustee to discharge their obligations under the trust.
25 It was not asserted that either (b) or (c) above had any application to this case. Looking at the amended Minute of Orders Sought by the applicant wife, the only document that could be said to reveal the reasoning process of the second respondent would be:
(a) documents recording the reasons for the proposed amendments to PWT; and (b) minutes of the meeting of the directors of W Pty Ltd.
Therefore, I propose to order the second respondent to produce all other documents referred to in the Amended Minute of Orders, except those enumerated above.
26 Because I am not making all of the orders as sought by the applicant wife, primarily because of my concern that they may reveal the reasoning process of the Trustee, it is necessary for me to deal with the argument advanced by counsel for the wife that the provisions of Part VIIIAA of the Family Law Act, 1975 override the common law.
27 Section 90AA provides as follows:
"Object of this Part
The object of this Part is to allow the court, in relation to the property of a party to a marriage, to:
| ||||
| that is directed to, or alters the rights, liabilities or property interests of a third party." | ||||
| 28 | Section 90AB provides as follows: "In this Part: "marriage" includes a void marriage. "third party", in relation to a marriage, means a person who is not a party to the marriage." |
29 As I understand the argument advanced by counsel for the applicant wife, it is that a combination of the Object section and s 90AC have the effect of overriding the common law. I am not persuaded by that argument for the following reasons:
(a)
I do not think that Division 1 of Part VIIIAA has anything to do with third party production;
(b)
third party production is a procedural matter, not a substantive matter, and is governed by the Rules and not by the Family Law Act 1975; and
(c)
even if the argument advanced by counsel for the applicant wife was correct, that does not mean that the policy considerations that emerge from the cases to which I have referred, would be any less applicable.
Right to copy
30 Relying upon the authority of Marigold Pty Ltd v Bellswan (Mandurah) Pty Ltd CIV 1385 of 2001, senior counsel for the second respondent argues that the applicant wife's legal representatives ought not to be permitted to obtain copies of documents inspected. That was a case in which White AUJ had said in a judgment:
"There is some basis in the evidence which I have set out above for a suspicion that Mr Tuxworth may be seeking information which may be damaging to the Trust and to the other beneficiaries thereof, if divulged to him. I put it no higher than that."
His Honour went on to say:
"The authorities cited by the plaintiff do not, in my opinion, support the proposition that a beneficiary's right to inspect trust documents includes a right to take copies thereof. Unless therefore, there is otherwise some obligation on a trustee to provide copies of documents to a beneficiary, derived perhaps from the Trust Deed, the beneficiary is not entitled to demand the provision of copies of documents from the trustee. … I am not persuaded that there is a right in the beneficiary to obtain copies thereof, merely upon tendering to pay the costs of copying. Of course, there is no reason why a trustee should not deliver copies of trust documents requested by a beneficiary, if the trustee wishes to do so."
31 The difference in the present case is that it is not the trustee inspecting documents. The documents are being inspected by the applicant wife's legal advisers for the purpose of establishing the true interest of the husband in the Trust and the value of that interest. In my opinion, it would be quite unreasonable for them not to be permitted to copy documents to enable them to examine them at a time convenient to themselves together with whatever other relevant documents they may hold. No issue of confidentiality has been raised, but even if it had been, on 5 May 2004, orders were made in the following terms:
"1.
That the husband shall do all such things and sign all such documents as may be reasonably necessary, and authorise the wife, her legal representatives and accountants engaged for the purposes of the proceedings, to inspect all such documents as they may request relating to the W Trust and other entities in the P Group of Companies.
2.
That the inspection of documents relating to the W Trust and other entities in the P Group of Companies not in the sole control of the husband, be limited to the wife, her legal representatives and accountants engaged for the purposes of the proceedings.
3.
That the inspection be permitted only upon the giving, by each person inspecting the document, of a written undertaking not to publish to any third party, whether orally, or in writing, any information contained in the documents inspected or produced as a result of such inspection."
In my view, those orders which were made by consent provide adequate protection for the second respondent.
32 Whilst I am not at the present time permitting inspection of some of the documents as requested by the applicant wife, I do not intend to dismiss that part of the application. I intend to adjourn those matters generally. If, after inspecting the documents which I am permitting to be inspected, the solicitors for the applicant wife are of the view that it is vital that they be permitted to view the other documents, they can re-list the matter on 7 days notice provided that they have first filed an affidavit setting out in detail why inspection of the balance of the documents is regarded as vital.
Orders
1. W Pty Ltd as trustee for the P W Trust make available for inspection by the wife and her accounting and legal advisers in these proceedings, the following documents:
(a)
the Deed for the P W Trust and all memoranda endorsed on the Deed in accordance with the terms;
(b)
all notices provided to the guardians of P W Trust by the Trustee of P W Trust;
(c)
all documents recording the terms of proposed amendments to P W Trust;
(d)
the consolidated accounts prepared for P W Trust in accordance with clause E(4) of the P W Trust Deed to include:
• a balance sheet • a statement of income and expenditure •
a list of assets held at the close of each accounting period
•
the names and addresses of all persons or firms having custody of all or any portion of the assets of the P W Trust
•
the report of any auditor appointed to audit the accounts for any relevant accounting period
(e)
the most recent set of accounts (consolidated or otherwise) in the possession or control of the Trustee of P W Trust in respect of any entity in which P W Trust has a direct or indirect interest;
(f)
a record of the distributions made by P W Trust, or the documents recording such distributions;
(g)
the Articles of Association, Memorandum of Incorporation or Constitution of W Pty Ltd together with documents evidencing any change to or variation of those Articles of Association, Memorandum of Incorporation or Constitution.
2. The documents in order 1 be available for inspection at the office of Mizen and Mizen, 69 Mount Street, Perth on or before _____ March 2005 between 9 am and 5 pm Monday to Friday with the wife's advisers being at liberty to copy any document by photo copier or scanner or a combination of both at their expense.
3. The application insofar as it relates to inspection of a document setting out the reason for proposed amendments to the P W Trust and the minutes of the meetings of the directors of W Pty Ltd be adjourned generally with liberty to re-list upon 7 days notice.
33 Upon publication of these reasons for judgment, I will hear counsel for each of the parties as to the form of orders I propose to make and any other matters arising out of these reasons for judgment.
I certify that the preceding [33] paragraphs are a true copy of the reasons
for
judgment delivered by this Honourable Court
Associate
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