Peters and Giannopoulos & Ors
[2017] FamCA 663
•30 August 2017
FAMILY COURT OF AUSTRALIA
| PETERS & GIANNOPOULOS AND ORS | [2017] FamCA 663 |
| FAMILY LAW – PROPERTY – Interim orders – Property application involving two trusts (second and third respondents) – Where wife subpoenaed second and third respondents for the production of documents – Where second and third respondents oppose production of documents – Where second and third respondents argue production spans 21 years and is oppressive – Consideration of ‘apparent relevance’ of production sought to wife’s case – Where wife’s case is that the second and third respondents’ assets are held on constructive/resulting trust for the husband – Where there is a lack of relevance between documents sought under production and wife’s case – Held: oppressive items in subpoenae struck out. FAMILY LAW – PROPERTY – Interim orders – Where wife argues that the second and third respondents’ assets are held on constructive/resulting trust for the husband – Where wife’s evidence does not particularise the equitable principle relied up and the relief sought – Where orders made for the wife to file a statement of contentions of fact and law relied up to better inform the parties of her position. FAMILY LAW – PROPERTY – Interim orders – Valuation – Where wife seeks valuation of second and third respondents’ assets and valuation of trusts by accountants – Where orders sought are opposed – Where cost of valuations will be substantial – Where wife seeks husband cover her cost of valuations – Where husband’s interest is as a mere beneficiary – Where it is held that the wife should particularise her position before orders made for valuations – No orders made. FAMILY LAW – PRACTICE AND PROCEUDRE – Disclosure obligations – Consideration of a party’s obligation to make disclosure in the preliminary stages of proceedings – Where there is an obligation to provide documents which are directly relevant to the main issues – Where documents need only have apparent relevance to the main issue in the proceedings. | |
| Family Law Act 1975 (Cth) ss 78(1), 79 | |
Family Law Rules 2004 (Cth) rr 13.01, 13.07, 13.22, 15.23
Baumgartner v Baumgartner (1987) 164 CLR 137
Botany Bay Instrumentation and Control Pty Ltd v Stewart (1984) 3 NSW LR 98
Hatton, VR & Attorney-General of the Commonwealth of Australia [2000] FamCA 892; (2000) FLC 93-038
Henderson v Miles (No 2) [2005] NSWSC 867
Hudson Timber and Hardware Ltd v Chaudhary Group Pty Ltd [2002] FCA 832
K & K [2008] FamCA 957
Masoud & Masoud (2016) FLC 93-689
O’Hara & O’Hara & Ors [2007] FamCA 1346
Papadopoulos & Papadopoulos No 2 [2007] FamCA 1683
Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1115
Schweitzer & Schweitzer [2012] FamCA 445
Trade PracticesCommission v Arnotts Limited (No 2) (1989) FCA 248; (1989) 21 FCR 306
White v Tulloch (1995) FLC 92-640
Scott on Trusts 4th Edition, 1989
| APPLICANT: | Ms Peters |
| 1st RESPONDENT: | Mr Giannopoulos |
| 2nd RESPONDENT: | S Pty Ltd |
| 3rd RESPONDENT: | H Pty Ltd |
| FILE NUMBER: | ADC | 3056 | of | 2014 |
| DATE DELIVERED: | 30 August 2017 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 27 July 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr McGinn |
| SOLICITOR FOR THE APPLICANT: | Tolis & Co Lawyers |
| COUNSEL FOR THE 1ST RESPONDENT: | Mr Richards |
| SOLICITOR FOR THE 1ST RESPONDENT: | Lempriere Abbott McLeod |
| COUNSEL FOR THE 2ND RESPONDENT: | Mr Whitington QC with Ms Kari |
| SOLICITOR FOR THE 2ND RESPONDENT: | Richards & Evans Commercial Lawyers |
| COUNSEL FOR THE 3RD RESPONDENT: | Mr Whitington QC with Ms Kari |
| SOLICITOR FOR THE 3RD RESPONDENT: | Richards & Evans Commercial Lawyers |
Orders
That the second respondent produce for inspection and copy within fourteen (14) days the following documents:-
(a)The trust deed of the R Trust and any amendments or variations thereto;
(b)All documents, notes, minutes, memoranda and resolutions of S Pty Ltd (“SPL”) arising out of or in connection with any meeting of directors and/or shareholders in respect of the resignation of the husband as a director of SPL in or about 2007 and in relation to the transfer of the husband’s shares in SPL to Ms D Giannopoulos;
(c)All documents, notes, memoranda or minutes relating to any distribution to the husband, the wife or their children including any debits or credits to their loan account from 23 September 2003 to the date hereof in the R Trust;
(d)All director guarantees signed by the husband in his capacity as a director of SPL.
That the third respondent produce for inspection and copy within fourteen (14) days the following documents:-
(a)The trust deed for Giannopoulos Family Trust and any amendments or variations thereto;
(b)All documents, notes, minutes, memoranda and resolutions of H Pty Ltd (“HPL”) arising out of or in connection with any meeting of directors and/or shareholders in relation to the resignation of the husband as a director in 2012 and in respect of the transfer of shares held by him to Ms D Giannopoulos;
(c)All documents, notes, memoranda or minutes relating to any distribution to the husband, the wife or their children including any debit or credit in their loan accounts from 23 September 2003 to the present in the Giannopoulos Family Trust;
(d)All director guarantees signed by the husband in his capacity as a director of HPL.
That paragraphs 2, 3, 4, 5 and 7 of the subpoena directed to X Pty Ltd are struck out.
That paragraph 2, 3, 4 and 6 of the subpoena directed to Y Pty Ltd are struck out.
That within sixty (60) days the wife is to file and serve a statement of contention of fact and law containing the following:-
(a) Confirm or otherwise specify the relief sought by final orders;
(b) Specify the material facts relied upon;
(c)Identify the statutory law and/or legal principles upon which she contends, justifies and entitles her to the relief she seeks.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Peters & Giannopoulos and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: ADC 3056 of 2014
| Ms Peters |
Applicant
And
| Mr Giannopoulos And S Pty Ltd And H Pty Ltd |
3rd Respondent
REASONS FOR JUDGMENT
INTRODUCTION
By Amended Initiating Application filed 25 January 2017, Ms Peters (“the wife”) seeks final orders for property settlement and an order of departure from the administrative assessment of child support. She has also filed an Amended Application in a Case seeking discovery from the second and third respondents.
The wife also seeks orders pursuant to s 78(1) of the Family Law Act 1975 (Cth) (“the Act”) that S Pty Ltd (“SPL”) as trustee of the R Trust (“RT”) holds the assets of RT for the husband arising out of a resulting and/or constructive trust. The wife seeks similar relief in respect of a declaration that H Pty Ltd (“HPL”) as trustee of the Giannopoulos Family Trust (“GFT”) holds a domestic property at F Street, Suburb G (“the Suburb G property”) for the husband arising out of a resulting and/or constructive trust.
In addition, the wife seeks a declaration pursuant to s 78(1) of the Act as to the legal and equitable interests of the husband and the wife in the assets of HPL and GFT.
The wife has joined RT as second respondent and GFT as third respondent to the proceedings.
By Amended Response filed 24 February 2017, the husband seeks orders to dismiss the Amended Initiating Application of the wife and a general order for settlement of property.
By Response to the Amended Application filed 20 April 2017, the second and third respondents seek that paragraphs 1 to 10 of the wife’s application be dismissed.
On 22 April 2016, I delivered reasons which in part dealt with an application by the wife that the husband produce by way of informal disclosure and production a range of documents that pertain not just to his personal financial circumstances but also to any interest that he might have in the “Giannopoulos Group”, but in particular RT and GFT.
For the reasons set out in that judgment I declined to make orders for discovery as sought by the wife other than bank statements of any account, including any savings or loan account in the husband’s name either solely or jointly with any other person as and from 1 July 2012.
The wife seeks the following orders in the Amended Application filed 25 January 2017 summarised as follows:-
(1)That the second respondent produce within 21 days to the wife’s solicitors the following documents:
(a)Financial statements and taxation returns for the financial years 1996 to the present date for SPL, RT, any entity in which SPL has any interest whatsoever and in relation to “SPL and Z Pty Ltd” previously known as “S Pty Ltd and Z Pty Ltd” (ABN …);
(b)The Trust Deed of RT and any amendments or variations thereto;
(c)The Trust Deeds and any amendments or variations thereto of any trust or unit trust of which SPL is a trustee, unit holder or beneficiary;
(d)All documents, notes, minutes, memoranda and resolutions of SPL including in its capacity as trustee of the RT arising out of or in connection with any meeting whether constituted formally or otherwise of directors and/or shareholders, including any annual general meeting from 1996 to the date hereof;
(e)All documents, notes, minutes or memoranda relating to any distribution to the husband, the wife or the children, including any debits or credits in the loan accounts from 1996 to the date hereof with respect to any of the entities in 1(a);
(f)All documents relating to the removal or appointment of trustees of RT or SPL;
(g)All director guarantees signed by the husband as director of SPL or as director of any and all entities in which SPL has any interest;
(2)That the husband, wife and the second respondent jointly instruct a valuer to undertake the valuation of all of the real property interests of SPL and RT including the real property interests of any entity in which SPL or RT may have an interest or involvement;
(3)That the husband, wife and second respondent jointly instruct an accountant to value RT and SPL;
(4)That the third respondent do produce copies of documents to the wife’s solicitors in similar terms to paragraph 1(a) of the application;
(5)That the husband, wife and third respondent jointly instruct a single expert to value the real property interests of HPL and GFT and then to instruct an accountant to value HPL and GFT;
(6)That the husband pay the wife’s share of valuations in respect of SPL, RT, HPL and GFT.
The orders sought by the wife are opposed by the husband in his Response of 24 February 2017 and by the Response of the second and third respondents SPL and HPL.
Whilst the husband joins with the second and third respondents in opposing the wife’s application, his focus is directed to the orders that require him to be involved in the valuation of real property and then the valuation of the second and third respondent entities, but also, that he pay the wife’s share of the valuations.
There are a number of facets to the husband’s opposition. He rejects the wife’s contention that SPL as trustee of RT and HPL as trustee of GFT hold the assets of trust for the husband arising out of a resulting and/or constructive trust.
Whilst the husband accepts that he is one of a range of discretionary beneficiaries of RT and GFT, the wife does not seek to value the husband’s beneficial interest including any right to proper administration but rather, the value of the entire entity.
He further argues that there is nothing in the affidavit in support of the wife’s application which provides any assistance in identifying the extent and cost of the proposed valuation exercise.
The husband’s position is that the real property and other assets of RT and GFT are likely to be substantial and the cost of obtaining real estate and forensic accounting valuations is beyond his capacity to do so. There is no assistance provided by the wife in her affidavit material, nor any written submission as to how it is proposed the husband would meet the orders for valuation costs as sought by the wife.
It appears uncontroversial that the cost of the proposed valuations will be substantial.
The opposition of the second and third respondent is that the orders sought by the wife span a period of 21 years and are oppressive, that the range of documents sought is vast and that the discovery lacks relevance in the absence of any attempt by the wife to particularise the categories of documents as sought referable to the particulars of her claim.
SUBPOENAE
On 16 February 2017 the wife caused to be issued subpoenae directed to Y Pty Ltd (“YPL”) and X Pty Ltd (“XPL”). In respect of YPL the following documents are sought:-
(1)Financial statements and tax returns for financial years 2007 to date for the following entities:-
(a)YPL;
(b)Any trust for which YPL is trustee;
(c)Any entities in which YPL have an interest as trustee, shareholder, unit trust holder or beneficiary;
(2)The trust deeds and amendments or variations thereto of any trust or unit trust of which YPL is a trustee, unit holder or beneficiary;
(3)All documents, notes, minutes, memoranda and resolutions of YPL including in its capacity as a trustee of any entity hereof arising out of or in connection with any meeting whether constituted formally or otherwise of directors and/or shareholders including any annual general meeting from 2007 to the date hereof;
(4)All documents relating to any distributions to the husband, the wife or their children including any debit or credits in the loan account from 2007 to the date hereof with respect to any of the entities comprising either YPL or any trust for which YPL is a trustee or has any interest as trustee, shareholder, unit trust holder or beneficiary;
(5)All documents relating to the removal or appointment of trustees.
In respect of XPL the documents sought are in similar terms to those as requested from YPL save and except that the period for which the documents are sought commences in the 2012 financial year.
That by Notices of Objection filed 8 March 2017, YPL and XPL objected to the subpoenae on the following terms:-
(1)That the documents sought are too vague to be sufficiently identified and involve a number of entities that are not a party to the proceedings and are otherwise oppressive;
(2)No conduct money has been provided to the subpoenaed party in accordance with rule 15.23 of the Family Law Rules 2004 (Cth) (“the Rules”).
I adopt and do not propose to repeat the summary of the background to the proceedings and what was said in respect of matters relevant to the Giannopoulos Group of entities in my judgment delivered 22 April 2016.
The background is supplemented by reference to the affidavits filed on behalf of Mr AA Giannopoulos (“the husband’s father”) and Ms D Giannopoulos (“the husband’s mother”) both filed 4 April 2017.
Mr AA and Ms D Giannopoulos
The husband’s parents are the directors of SPL. The husband’s mother is the appointor of RT and GFT. It is not challenged that she has always been the appointor of the trusts. SPL was incorporated on 25 January 1996. The husband’s mother holds the 20 ordinary shares that have been issued. SPL does not trade in its own right. It is the trustee of RT established by deed on 26 February 1996.
The husband is the specified beneficiary, although the class of discretionary beneficiaries includes any spouse of the husband, children, the husband’s parents, their children, grandchildren and their spouses and other family members.
In relation to HPL the 40 ordinary shares issued are held by the husband’s mother. Like SPL, HPL has as its only purpose to be the trustee of GFT. It does not trade in its own right. The 40 ordinary issued shares are held beneficially by the husband’s mother. She is the specified beneficiary and similar to RT, the class of discretionary beneficiaries is wide.
Each of the trusts holds interests in various assets including real estate, publicly listed shares, motor vehicles and units in other unit trusts which hold various parcels of land. In particular, GFT holds the majority legal interest in the property situate at F Street, Suburb G (“the Suburb G property”) which is the former matrimonial home.
The makeup and construct of the trusts are agreed.
The wife refers to the history of the husband’s loan account with SPL as set out in the husband’s father’s affidavit at paragraph 13(j)(iii). In summary the husband had a credit loan account in 2002 in the sum of $1,253,464, but that it was gradually reduced such that as at the date of separation the loan account was in credit to $37,563, but is now in debit (as at the date of the affidavit) in the amount of $185,520. It does not appear the subject of challenge that the only distributions received by the husband from SPL are in the amounts of $24,148, $28,555 and $22,741 in the years 2005, 2006 and 2007.
In relation to GFT, the husband had a credit loan account in 2007 in the amount of $803,868, but as at the date of separation in 2012 the credit balance was $10,118 and as at the date of the affidavit the husband had a debit loan account in the amount of $287,876.
The husband apparently received distributions from the trust of $55,000 in 2009, $95,000 in 2010 and $20,000 in 2013.
YPL and XPL
The purported relevance of YPL and XPL and therefore the explanation for the documents sought by the wife are set out in paragraphs 65 to 68 of her Affidavit of 1 March 2016. The wife’s focus is in respect of the purchase of a hotel premises. In relation to YPL, the husband’s father states that it was incorporated in 1985 and both he and his wife are the only two directors. The 100 ordinary shares are held by his wife. He asserts that the husband and the wife have no interest in YPL and that:
(1)They have never held shares in YPL;
(2)They have never received any benefit from YPL;
(3)They have never contributed money to YPL.
In relation to XPL, this was incorporated in 2012 and related to the purchase of a hotel. The two directors are the husband’s parents and the 100 shares issued are held by the husband’s mother. The function of XPL is as a trustee to XPL Discretionary Trust (“XDT”) and the husband’s father says:-
(1)The husband is in the class of discretionary beneficiaries but has never received a distribution and has never had a loan account in the trust.
(2)The husband has never held shares in XPL and has never received any benefit.
(3)That whilst the husband was a director of XPL for a short period of time he was removed as a director in October 2012.
The husband’s parents are opposed to the provision of documents as sought by the wife pursuant to subpoena.
WHAT IS A PARTY’S OBLIGATION TO MAKE DISCLOSURE?
Legislative Framework
The obligation to provide disclosure is governed by Chapter 13 of the Family Law Rules 2004 (Cth) (“the Rules”). Under r 13.01 there is a general duty on parties to a proceeding to make “full and frank disclosure of all information relevant to the case”. That duty or obligation is narrowed by r 13.07 to documents that are:-
(a)in the possession, custody or control of the disclosing party; and
(b)documents that are relevant to an issue in the case.
A party may seek an application for disclosure under r 13.22. The onus rests with the applicant seeking the disclosure order that the disclosure “is necessary for disposing of the case or an issue or reducing costs” (r 13.22(2)).
The explanatory statement to the rules state that it was the intent of the rules that discovery be of material “directly relevant to an issue”. The explanatory statement provides:-
The requirement to disclose “directly relevant” documents will introduce a higher standard of assessment in the sifting and examination of a client’s documents. This will oblige parties and lawyers to focus attention at an early stage upon the real issues in dispute and the documentary evidence that goes directly to those issues.
Paragraph 116 of my earlier judgment is apposite to the current enquiry:-
[116]On 1 August 2011 the Federal Court of Australia adopted the Federal Court Rules 2011 (Cth) and provided for a revised regime for discovery in Part 20. These changes impact the extent and cost of discovery. Part 20 provides for:-
· Increased judicial control of discovery;
·A default or standard form of discovery that requires that documents be “directly relevant” to issues in the pleadings and in the parties’ “control” after conducting “a reasonable search”; and
·A more flexible and responsive non-standard discovery regime that can be tailored to the specific case, such as those that are likely to be document intensive, especially where the documents are stored electronically.
I considered that the import and intent of the rules is to stem unnecessary discovery and to require that documents that are sought have an apparent connection or relevance to the proceedings.
Case Law
In Masoud & Masoud (2016) FLC 93-689 the Full Court examined a party’s obligation to make discovery. The Court held that the trial Judge erred in raising the husband’s obligation to produce documents to an “absolute obligation” to obtain documents by any means. The husband was a beneficiary of a discretionary trust.
The Full Court cited with approval the decision of O’Reilly J in Schweitzer & Schweitzer [2012] FamCA 445 that a beneficiary of a discretionary trust only has the right to access financial documents for the purpose of ascertaining that there is due administration. The difference in the current proceedings is that the wife seeks discovery from the second and third respondents given that her pursuit of the husband to make discovery was dealt with in my earlier judgment.
The converse argument made on behalf of the second and third respondents is that whilst there may be an obligation to discover documents that may go to the issue of due administration, that is not the relief sought by the wife. She contends that the husband’s proprietorial interest in RT and GFT goes significantly beyond a value that may be attributable to the right of the beneficiary of a discretionary trust to due administration but rather, that the assets of the trusts are held on trust for the husband arising out of a resulting and/or constructive trust, or that there be a declaration as to the legal and equitable interests of the parties in the assets of RT and GFT.
What is the test and breadth of relevance?
The test for relevance can be summarised as whether the documents sought “may” have a connection to the “main issue in the case”. Accordingly, where the wife seeks documents in relation to the trusts, she must establish that the production of those documents “could” better inform the Court of the husband’s financial position for the purpose of achieving a s 79 division of property.
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”. In Trade PracticesCommission v Arnotts Limited (No 2) (1989) FCA 248; (1989) 21 FCR 306 Beaumont J saw relevance as something where a document “could possibly throw light on the issues in the main case”.
In Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1115 Brereton J looked at a number of authorities including those of the Family Court and said at [25]:-
Thus it is plainly not the question at this (first) stage where 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.
In Papadopoulos & Papadopoulos No 2 [2007] FamCA 1683 Cronin J observed at [49] to [51]:-
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.
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.
The onus in establishing the relevance lies on the person seeking the production of the documents either by way of subpoena or through discovery (citation omitted).
In Hudson Timber and Hardware Ltd v Chaudhary Group Pty Ltd [2002] FCA 832, the Full Court of the Federal Court examined the issues 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 documents which has material forensic relevance could be shown to exist, then a subpoena would not normally be set aside.
What informs whether something is relevant and not a fishing expedition?
In Hatton, VR & Attorney-General of the Commonwealth of Australia [2000] FamCA 892; (2000) FLC 93-038, the Full Court noted that given that there were no pleadings in the Family Court of Australia, the only way in which “apparent relevance” of the subpoenaed material to the main property settlement proceedings could be established was by reference to the affidavit material filed in those proceedings.
In Anderson & Anderson and Ors [2014] FamCA 491, Cronin J considered the position in Hatton (supra) and said at [19]:-
In Hatton (supra) at para 59, the Full Court was referring to the fact that the affidavit material was the only material that was available to the trial judge in that case. I consider the principle to be a guide. The strict nature of the disclosure obligations as set out in chapter 13 of the rules of the Court also provide guidance but so too does contemplation of the provisions of Part VIII of the Act which have to be established if a matrimonial cause is prosecuted. Whilst it was asserted by the objector that the perception was that this was a case based upon income, the substantive proceedings are significantly different. The interlocutory proceedings are but a prelude to, and clearly assist in, the substantive proceedings. I consider that the Court is entitled to determine the relevance issue on the affidavit material, the financial statements and the applications of the parties knowing of the legal issues to establish them.
It is therefore necessary to consider what is not relevant and what may constitute a fishing expedition.
In K & K [2008] FamCA 957, the husband was previously the director of a number of companies and subsequently tried to distance himself from those companies around the time of separation. The wife sought disclosure in relation to the companies. The companies were now owned and controlled by members of the husband’s family.
The wife argued that disclosure by the husband is relevant because of the following factors:-
(1)During the marriage, the husband had access to large amounts of money believed to be sourced from “overseas and from companies within the [K] Group”;
(2)The K Group had been traditionally owned, managed and controlled by six members of the husband’s family and in that, she included the husband;
(3)The husband deposed to the fact that he was not an appointor in any trust (associated with the K Group) but that assertion was at odds with trust deeds provided to her solicitor;
(4)The husband had disclosed an interest in a variety of companies within the K Group;
(5)The husband’s representations as to his having no interest in the K Group and having gotten out of the business were false;
(6)The K Group’s Human Resource Manager had made an earlier representation to a Government Board or Body that the husband was a member of the Board of K Group and was the manager responsible for one division of the company.
In reply the husband said:-
(1)The historical matters should be a matter for trial;
(2)The statements, assertions and assumptions of the wife about his family, the entities and the trusts were matters over which he had no control and in which he had no interest; and
(3)In relation to the earlier statement made by others to a Government Board, the husband had no knowledge of the statement and in any event, if the statement was made it was “incorrect”.
In assessing what disclosure was “directly relevant”, Cronin J considered it a useful assessment to determine what is not relevant and would be considered a fishing expedition. At paragraph 18:-
[18]…In Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 575 “fishing expedition” is defined as an exercise “endeavouring not to obtain evidence to support a case, but to discover whether the person has a case at all” and in Rowntree v ASC (Fed C of A, Lockhart J, 27 November 1992, unreported), Lockhart J described fishing as:-
allowing a party who can produce no material to support an allegation, access to the documents of his opponent in the hope that he may discover something that supports his case.
Cronin J considered that the “fishing” test applied equally to this Court.
His Honour opined that a “less strict approach” of what is relevant should apply in family law proceedings than the standard adopted in other jurisdictions. In considering whether the wife was “fishing” his Honour considered:-
[20]There is an indication here that the wife is “fishing” within the meaning of the civil law definition but because of the family connection of the husband and more importantly, the parties’ past connections with that enterprise, she should only have to show that there is a plausible explanation for her endeavours.
Cronin J was not satisfied that the documents pursued by the wife were in the possession or control of the husband and even if they were and notwithstanding what he considered the “less strict approach” the wife had not been able to show that an order for specific discovery of the documents should be made.
The elements of the wife’s claim
As discussed, the wife seeks a declaration that the property of RT and GFT is held for the husband arising out of a resulting and/or constructive trust.
A constructive trust, as recognised in Baumgartner v Baumgartner (1987) 164 CLR 137 is one that exists because “a refusal to recognize the existence of the equitable interest amounts to unconscionable conduct and the trust is imposed as a remedy to circumvent that unconscionable conduct”.
The principle has been described as the “windfall equity” and in Henderson v Miles (No 2) [2005] NSWSC 867 the following appears at [95] namely that a trial Judge:-
…looks not to the detriment that might be suffered because the arrangement did not continue, but merely to the detriment of losing a fund to the other party to the arrangement through unexpected circumstances, where such loss would result in the other having an unconscionable gain.
Accordingly, a constructive trust is not a resource of the Court in circumstances of fairness, but only where it is necessary to establish a legal or equitable principle. The difference between a resulting or constructive trust and an expressed trust is that it is raised without reference to the parties’ intention.
In Scott on Trusts 4th Edition, 1989, Volume 5 at (48) Professor Scott said:-
It is sometimes said that when there are sufficient grounds for imposing a constructive trust, the court “constructs a trust”. The expression is, of course, absurd. The word “constructive” is derived from the verb “construe” not from the verb “construct”… The court construes the circumstances in the sense that it explains or interprets them; it does not construct them.
In Giumelli v Giumelli (1999) CLR 101 the Court held that a constructive trust should not be imposed if a different but appropriate equitable remedy is available which falls short of the imposition of a trust.
The Court considered that whilst a party had incurred detriment from acting in reliance on a third promise, the remedy was not the transfer of a proprietary interest in land but rather, for the payment of a monetary sum.
Consideration must be given to what is asserted defines the constructive trust or some other equitable remedy. It is a consideration of whether the constructive trust seeks to restore to a party contributions made pursuant to a joint endeavour, or whether the detriment arises from a promise that is unfulfilled and can be considered as unconscionable conduct. It is a reasonable proposition that the question of whether a document is relevant to the proceedings and directly so must be informed from the nature of the claim.
Matters relied upon by the wife
The wife seeks discovery against the second and third respondents for the reasons given at paragraphs 33(b) and (e) of her affidavit filed 25 November 2016. She asserts:-
(1)The husband is the beneficiary of [RT] and [GFT] and has derived benefits from the trusts including but not limited to:-
(a)The parties have had sole use and occupation of the former matrimonial home owned 1/1000th by the husband 999/1000th by [HPL];
(b)The parties have sole use and enjoyment of two motor vehicles registered to [HPL];
(c)The husband has had substantial credit and loan accounts with [RT] and [GFT];
(d)The child’s school fees, all expenses related to the former matrimonial home and the car have been paid by [HPL];
(e)The husband receives financial advances from [RT] and [GFT];
(2)The wife asserts that:-
(a)The husband has control over the capital and income of [RT] and [GFT];
(b)The husband has contributed directly and indirectly, financially and non-financially to the assets of [RT] and [GFT];
(c)The husband had effective control as trustee of [GFT] from 1996 to 1997 when he was the sole director;
(d)The husband’s mother did not exercise her duties as director of [SPL] between 2007 and 2012;
(e)The husband was removed from directorship of [SPL] and [HPL] at about the time of separation.
The wife does not allege an alter-ego argument but claims that the husband and/or the wife have an equitable claim arising from the existence of a constructive or resulting trust or other equitable remedy.
If that is the case and by reference to the affidavit material relied upon, I do not consider that the matters raised in paragraph 33(b) or (e) without more could support the range of documents requested by the wife.
There may well be documents that relate to the husband’s involvement with RT and GFT that have obvious relevance to the matters likely to be considered pursuant to s 79 of the Act, but without more I am not able to identify the connection between the documents sought and the claims made pursuant to s 78 of the Act.
I propose to order that the second and third respondents produce the following documents:-
(1)The trust deed for RT and any amendments or variations thereto;
(2)All documents, notes, minutes, memoranda and resolutions of SPL arising out of or in connection with any meeting of directors and/or shareholders in respect of the resignation of the husband as a director of SPL in or about 2007 and in relation to the transfer of the husband of his shares in SPL to Ms D Giannopoulos.
(3)All documents, notes, memoranda or minutes relating to any distribution to the husband, the wife or their children including any debit or credit in their loan accounts from 23 September 2003 to the date hereof in RT.
(4)All director guarantees signed by the husband in his capacity as director of SPL.
(5)The trust deed for GFT and any amendments or variations thereto.
(6)All documents, notes, minutes, memoranda and resolutions of HPL arising out of or in connection with any meeting of directors and/or shareholders in relation to the resignation of the husband as a director in 2012 and in respect of the transfer of his shares held by him to Ms D Giannopoulos.
(7)All director guarantees signed by the husband in his capacity as director of HPL.
In her affidavit of 1 March 2016 the wife refers to the purchase of a hotel and land in the period near the end of the parties’ relationship. The focus on XPL and YPL relate to the purchase of the hotel. In his affidavit, the husband’s father refers to the purchase of the hotel and denies that the husband had any significant role in the acquisition of the premises.
In 2012 he was contacted and advised that the hotel was again available for purchase and following advice created the XPL Discretionary Trust to hold a portion of the land with XPL as the trustee.
There were three titles in all and the other two remaining titles were purchased by two other entities controlled by the husband’s parents. A row of shops was purchased by YPL. The husband’s father asserts that no bank finance was required and that the funds for the hotel came from the sale of the farming land in an unrelated trust. It is not suggested by the wife that she disagrees with the history of acquisition. The purported relevance of the documents sought under subpoena is set out in the wife’s affidavit of 24 January 2017 and in particular at paragraph 13 where the following is stated:-
I say that with the knowledge in 2012 that our marriage was in difficulty and, subsequently, following our separation, the husband personally conducted on behalf of the entities described in paragraphs 6-8 hereof, the purchase of the hotel and surrounding land in a manner that sought to ostensibly distance him from the [hotel] and surrounding land for the purpose of seeking to defeat my claim as it relates to his exercise of control over the entities that purchased the [hotel] and surrounding land and the beneficial interest he has in those entities.
It is not suggested in the affidavit that the husband made any financial contribution towards the acquisition of the hotel, nor is there any explanation as to the nature of the “beneficial interest” that the husband allegedly has in YPL and XPL. More information is required.
In Hatton (supra), the Full Court endorsed the remarks of Powell J in Botany Bay Instrumentation and Control Pty Ltd v Stewart (1984) 3 NSW LR 98 at [100] – [101] in terms of the examples in which a Court should exercise its jurisdiction to set aside a subpoena including:-
(1)Where the subpoena has been used for the purpose of obtaining discovery against a third party;
(2)Where compliance with a subpoena to produce documents would be oppressive; and
(3)Where the subpoena has been issued for the purpose which is impermissible i.e. a fishing expedition.
Justice Cronin in O’Hara & O’Hara & Ors [2007] FamCA 1346 added lack of relevance as the ground for setting aside a subpoena, particularly in circumstances of a family situation where the entities are often interconnected and involved with other family members:-
If the invasion [to a non-party’s privacy] will assist in the pursuit of justice then subject to the amelioration of the costs and the expenses problem, it is one which the community must accept as necessary.
In O’Hara (supra), Cronin J said at [35]:-
The invasion of privacy of a purely unrelated party is something which must be considered carefully but equally, careful scrutiny of the situation must occur where there is an allegation that the non-party has links with or is in league with a party to the substantive proceedings. Where the evidence points to that closeness of relationship, the court should be more cautious about excluding a party to the substantive proceedings from pursuing this information.
Whilst it is also argued that the category of documents sought is too wide and therefore oppressive, I consider that any enquiry of documents other than those that relate to distributions to the husband, the wife or their children, including any debit or credit loan accounts from 2012 to the present, lack sufficient relevance to the proceedings.
Accordingly, I propose to strike out items 2, 3, 4 and 6 of the subpoena directed to YPL and items 2, 3, 4, 5 and 7 of the subpoena directed to XPL.
ORDER FOR PARTICULARS
The proceedings are listed for final hearing.
Consideration will need to be given as to whether the matter is able to proceed where there remains some uncertainty as to the nature and extent of the wife’s claim.
As discussed, different considerations apply if the wife’s claim is as to the existence of a resulting and/or constructive trust or some other equitable relief leading to a declaration of legal and equitable interests in the assets of RT and GFT.
At present it is not contended that the matters raised in the wife’s Affidavit filed 25 November 2016 would be sufficient to establish the claim that RT and GFT hold the entirety of their assets on trust for the husband in circumstances where there is no suggestion of joint venture, common interest, financial contribution or detriment currently alleged.
There is also no assistance in the pleading of the wife’s claim as to the manner in which the claim should be met by a monetary sum or the transfer of assets and if so, which assets other than the F Street property.
I do not consider that it is sufficient for the applicant to state the final orders that she seeks and leave the husband, the second and third respondents, to guess at the particular equitable principle that is to be relied upon and the relief that is sought. The second and third respondents should be entitled to receive a statement of contentions of fact, law and particulars upon which the wife intends to rely. In doing so, it may assist the wife to give consideration to the strengths and weaknesses of her case. It will also assist in identifying what documents should be discovered by the second and third respondents as being relevant to the claim.
Accordingly, the wife should file and serve a statement of contention of fact and law containing the following:-
(1)Confirm or otherwise specify the relief sought by final orders;
(2)Specify the material facts relied upon;
(3)Identify the statutory law and/or legal principles which she contends justifies and entitles her to the relief she seeks.
VALUATION ORDERS
The wife seeks that RT and GFT be the subject of valuation by the valuation of real estate and then the appointment of a forensic accountant to value the trust entities.
It is conceded that the valuation exercise is likely to be both extensive and at significant cost. The wife seeks that the husband pays the cost of valuation at first instance. The husband argues that he does not have the financial resources to do so and that the wife has not identified how the process would be undertaken and the source from which the disbursement costs would be paid.
In circumstances where the husband is a beneficiary of the trusts, I am not able to readily link the need for the entirety of the trusts to be valued if it is only the husband’s proprietary interest in a right of due administration of the trust that ultimately is the focus of the wife’s claim.
Until the wife’s claim has been the subject of appropriate particularisation, it is premature for the parties to embark upon a valuation process that is opposed and may ultimately be incapable of funding.
I do not propose to make orders in terms of paragraphs 2, 3, 5 and 6 of the amended application.
I certify that the preceding ninety (90) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 30 August 2017.
Associate:
Date: 28 August 2017
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