Petrucci and Delos
[2017] FamCA 1079
•21 December 2017
FAMILY COURT OF AUSTRALIA
| PETRUCCI & DELOS | [2017] FamCA 1079 |
| FAMILY LAW – PROPERTY – Discovery – Where the husband seeks extensive discovery – Consideration of requested documents and discovery already provided by the wife – Orders made for partial discovery of documents. |
| Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) Federal Court Rules 2011 (Cth) |
| Alanco Australia Pty Ltd v Higgins (No 2) [2011] FCA 1063 | ||
| APPLICANT: | Mr Petrucci | |
| RESPONDENT: | Ms Delos |
| FILE NUMBER: | ADC | 4580 | of | 2015 |
| DATE DELIVERED: | 21 December 2017 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 20 December 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Dillon |
| SOLICITOR FOR THE APPLICANT: | Rudall & Rudall |
| COUNSEL FOR THE RESPONDENT: | Ms Dickson |
| SOLICITOR FOR THE RESPONDENT: | Lumond Lawyers |
Orders
The wife provide all necessary authority to B Accountants of C Street, Suburb D to provide all information and copies of documents as may be requested by the husband in respect of the following:-
(a) E Trust trading as F Pty Ltd;
(b) F Pty Ltd;
(c) Ms Delos Family Trust;
(d) G Pty Ltd.
That within forty five (45) days of these orders the wife discover the following documents and make same available for inspection, copy or provision by electronic means the following:-
(a)Paragraphs 1(c)(A), (C), (E) and (H) of the Amended Application in a Case filed 24 November 2017;
(b)The wife’s taxation returns and financial statements for the financial years ending 2014, 2015 and 2016.
That the wife do all things necessary and provide all such information to her accountants to enable her taxation return and financial statements to be prepared for the 2017 financial year by 31 March 2018.
The wife provide her member entitlement statements for her interest in H Super Fund for the financial years ending 2016 and 2017 together with the following:-
(a) Income tax returns for the financial years ending 2015, 2016 and 2017;
(b) Financial statements for the financial years ending 2015, 2016 and 2017;
That in relation to any property that is the subject of agreement as to value, the parties do jointly instruct an appropriately qualified valuer to provide a valuation or updated valuation as may be required. The cost of same to be borne equally by the parties.
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 Petrucci & Delos 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 4580 of 2017
| Mr Petrucci |
Applicant
And
| Ms Delos |
Respondent
REASONS FOR JUDGMENT
Introduction
By Initiating Application filed 7 December 2015 Ms Delos (“the wife”) seeks orders for settlement of property and parenting orders in relation to J born in 2002 and K born in 2004. The children live with the mother and spend time with the father.
The wife seeks orders that Mr Petrucci (“the husband”) retain his interest in the business known as F Pty Ltd, various modified motor vehicles, some liability and a boat.
The wife seeks to retain her interest in property at Suburb L, Suburb M, two properties at Suburb N, a motor vehicle and an interest in superannuation. She seeks to indemnify the husband in relation to substantial loans provided by members of her family or entities involving and/or controlled by them.
The husband orders provide no assistance in terms of the particulars other than that the net assets of the parties be divided between them on a just and equitable basis either as agreed or as ordered by the Court.
On 16 November 2017 all applications for final orders were listed for hearing on 3 April 2018. The husband had filed an Application in a Case on 15 November 2017 seeking orders for extensive discovery.
The drafting of some of the orders were problematic in that discovery was sought from non-parties to the proceedings.
The matter was adjourned and orders provided for an opportunity to the husband to file an Amended Application in a Case that better targeted the gravamen of the request for discovery.
The husband relies upon an Amended Application in a Case filed 24 November 2017 together with an Affidavit in support filed 14 November 2017.
The wife’s Response filed 12 December 2017 seeks to dismiss the husband’s application other than as it relates to documents proscribed in paragraph 1(c)(A),(C),(E),(H) which the wife agrees to provide.
Principles to be applied
Chapter 13 of the Family Law Rules 2004 (Cth) (“the Rules”) imposes an obligation of full and frank disclosure on the parties to Family Court proceedings and provides specific mechanism by which that obligation must be fulfilled.
In his Outline of Submissions, the respondent’s counsel summarises the obligation in the following terms:-
It is almost trite to observe that in the Family Court the duty of disclosure is absolute, both inter partes, and as a duty to the Court. (Family Law Rules (2004) Chapter 13). As noted in Briese and Briese (1986) FLC 91.713, ‘the need for each party to understand the financial position of the other party is at the very heart of cases concerning property and maintenance’.
Despite the breadth of the duty to disclose, there are concerns about the over-broad disclosure of documents in Family Court proceedings. The restriction on the obligation of discovery has been the subject of discussion as it relates to subpoenas to produce documents. Smithers J in Lucas Industries Ltd v Hewitt (1978) 18 ALR 555 at 570 said:-
The purpose of the process of subpoena is to facilitate the proper administration of justice between parties. For that purpose it is the policy of the law that strangers who have documents may be put to certain trouble in searching for and gathering together relevant documents and bringing them to court. It is according to the same principle that persons who have knowledge of facts are put to the inconvenience of being brought to court and required to give evidence.
In Hatton & Attorney-General of the Commonwealth of Australia (2000) FLC 93-038 the relevance of documents in the context of a subpoena was considered by the Full Court and the following examples were given where a Court may determine that it is proper to set aside a subpoena:-
· If the subpoena is for an improper purpose namely to obtain discovery against a third party.
· Where it might be oppressive to comply with a subpoena.
· Where a party embarks upon a “fishing expedition”.
· That the subpoena should be set aside because it lacks relevance to the proceedings.
In Martin & Martin and Anor(No 2) [2014] FamCA 232, Cronin J found that the focus of the Court should be whether it was “on the cards” that the documents would materially assist. His Honour considered his own comments in Woley & Humboldt (No 3) [2009] FamCA 546 where he said:-
[39]In Hudson Timber & Hardware Limited v Chaudhary Group Pty Ltd [2002] FCA 832, the Full Court of the Federal Court examined the issue of apparent relevance and said that the relevant principles governing the obtaining of documents on subpoena which have “apparent relevance” were that inter alia that:-
(1)The relevance of the documents was not limited to documents directly admissible in themselves in proof of an issue raised in pleadings; and
(2)If a class of document which has material forensic relevance could be shown to exist, then a subpoena would not normally be set aside.
The obligation to make discovery is not in the abstract but rather, requires the parties to consider the relevance that the documents may have to an issue in dispute. The objective should be to assist the Court in the disposal of an issue or the dispute in general.
At an early stage in the proceedings it is not necessarily easy to define the issues and therefore the extent to which a document or a category of documents may have a sensible relevance. As the proceedings progress, the issues are cast more clearly and accordingly the parties are better able to ascertain what documents are truly relevant and germane to the task that the Court is required to undertake.
Obviously, the respondent’s application must be determined in the context of the orders that each of the parties seek and the evidence they rely upon as set out in the trial affidavit material.
In recent years superior courts have taken a more modern approach to general discovery. In part this is as a result of the enormous amount of documentation that is involved and the burden and cost of discovery in many cases where it may not be necessary. The discovery process has been criticised as having disadvantages including the swamping of parties with masses of material which tend to delay the proceedings and to fog the real issues.
On 1 August 2011 the Federal Court of Australia adopted the Federal Court Rules 2011 (Cth) and its revised regime for discovery in pt 20. These changes have impacted upon the extent and the cost of discovery.
Part 20 provides for:-
·Increased judicial control of discovery;
·A default or standard form of discovery (r 20.14) that require the documents be “directly relevant” to issues in the pleadings and in the parties “control” after conducting a “reasonable search”; and
·A more flexible and responsible non-standard discovery regime (r 20.15) that can be tailored to the specific case, such as those that are likely to be document intensive, especially where the documents stored electronically.
The new regime for discovery in the Federal Court proceedings is on the basis of two principles namely, that a party must not apply for discovery unless the making of an order will “facilitate the just resolution of the proceedings as quickly, inexpensively and efficiently as possible” and that a party is not able to provide discovery unless the Court has made an order for discovery.
The focus is to prevent unnecessary discovery: see Denis v ChambersInvestment Planners Pty Ltd [2012] FCA 63.
In Alanco Australia Pty Ltd v Higgins (No 2) [2011] FCA 1063 the following is said at paragraphs [8]-[9]:-
For that purpose under the 2011 Rules, discovery is to be given only when ordered by the Court rather than pursuant to any private arrangement between the parties (r 20.12). Under both sets of Rules, documents must be directly relevant to the issues raised in the proceedings by pleading or affidavit or affidavits accompanying the originating application, in addition, it is necessary that the documents must meet at least one of the following criteria (r 20.14(2) of the 2011 Rules):
(a)The documents are those on which the party intends to rely;
(b)The documents adversely affect the party’s own case;
(c)The documents support another party’s case;
(d)The documents adversely affect another party’s case.
While more extensive and special discovery may be permitted where the party satisfies a court as to the need (r 20.15 of the 2011 Rules), the overriding objectives and purpose must always be borne in mind.
Accordingly, the purpose of the rules is to require parties to consider the extent to which discovery is required and whether the document or documents are necessary as being relevant to the issues raised, that a party is aware of them and that they are or have been in a parties control.
For discovery to be the subject of an order the document must pass the “directly relevant” test.
The direct relevance test is aimed at narrowing the scope of discovery. The meaning of direct relevance is that of relevance in the sense of requiring the document be directly on point and that it tends to prove or disprove the allegation in issue.
It is understood that the current proceedings do not necessarily fall within the category of “commercial proceedings”. It is also important to differentiate proceedings under the Family Law Act 1975 (Cth) where the parties may have different levels of control and advantage. In many cases, without the clear obligation on a party to make full and frank disclosure, matters that could well be relevant to the issues that the Court needs to determine may not be known by any other means.
Accordingly, the Rules impose a more generous obligation in respect of discovery than might now be the practice in other superior courts. That obligation falls short of discovery without forensic focus.
Issues in dispute
By reference to items 19, 20 and 21 of the husband’s summary of the parties’ interests at paragraph 47 of his affidavit filed 14 November 2017, he seeks documents in relation to the following entities:-
a)Ms Delos Family Trust;
b)E Trust;
c)G Pty Ltd.
The wife agrees that she is the appointor, beneficiary and trustee of Ms Delos Family Trust, E Trust and is the director of G Pty Ltd.
It is her evidence that the entities do not trade and accordingly Ms Delos Family Trust and E Trust have no assets. The wife asserts that she has provided trust deeds and other relevant documents but that ultimately the proposition is straightforward, namely; that they hold no mystery for the husband and that any interest she has is without value.
The E Trust was the trust that operated F Pty Ltd which whilst the wife held the governance, the husband conducted the day to day management and operation of the entity.
The wife does not have any documents but rather contends that she is prepared to give all necessary authority to enable the husband to contact the accountants of the parties during their relationship to obtain such information as he may hold, not just in relation to the three described entities, but also other documents that are able to be provided arising from the accountant’s letter of 17 November 2017 being annexure “AD4” to the wife’s affidavit of 12 December 2017.
The second category of entities relate to members of the wife’s family. At paragraph 61 of her affidavit the wife refers to O Pty Ltd, P Family Trust trading as Q Pty Ltd, R Pty Ltd and S Pty Ltd.
The husband raised two further entities being T Pty Ltd and U Pty Ltd. The wife has no information in respect of these entities and is uncertain as to whether they exist.
The various entities come under the envelope of the Delos Group of companies. Q Pty Ltd is owned and controlled by the wife’s parents as are the other entities described.
The wife historically held shares in R Pty Ltd but the company did not trade and the fully paid up value of the shares was $33.34 with net assets of the company being $100.
It is not asserted by the husband that the wife holds a valuable interest or that any of the entities that comprise the Delos Group of companies might be considered the alter ego of the wife.
It seems reasonably clear from company searches that the Delos Group was likely the creation of the wife’s parents.
By reference to annexure “AD4” to the wife’s affidavit the summary from the accountant is in the following terms:-
In summary – your parents have full control over the land holdings with [V] Pty Ltd [as they are the existing and only shareholders] and the same applies to [O Pty Ltd].
PS – The only this is that for some reason [Ms W] & [Mr X Delos] and [Ms Delos] appear to be Directors/Officeholders of [V] Pty Ltd. I assume this was probably does for assistance in the day to day running of this Company and Bank Accounts accessibility etc etc. But note NO OWNERSHIP BY CHILDREN AS THEY ARE NOT SHAREHOLDERS.
The Amended Application
By reference I make no order in relation to 1(a) and 1(b) of the amended application. I will order that the wife provide all necessary authorities to the B Accountants to provide to the husband whatever documents may be held by them in relation to the business of F Pty Ltd operated by E Trust.
I am not satisfied that documents in respect of the children’s various accounts are directly relevant to the proceedings.
The wife consents to an order in terms of paragraph 1(c)(A), (C), (E) and (H). In relation to the balance of the accounts referred to the in paragraphs 1(c)(B),(D),(F) and (G) these accounts have all been closed. The wife has offered to provide a statement (if available) as to the closing balance of those accounts and accordingly other than as agreed I propose to make no further order in relation to the documents specified in 1(c) of the application.
The wife contends that she has provided a tax invoice from Q Pty Ltd with regards to its ownership of the Jeep motor vehicle.
At face value, I accept the wife’s assertion made on oath and propose to make no further order.
Paragraph 1(d)(B)-(F) inclusive and (H) are all matters that appear as part of the wife’s taxation returns and financial statements up to and including the 2016 financial year. The 2017 returns have not been done.
In the circumstances of the case it seems reasonable that the wife do all things necessary to cause her 2017 tax return and financial statements to be prepared by 31 March 2018. I propose to so order but make no other order in relation to the document referred to.
The wife says that she has provided all insurance policies in paragraph 1(d)(G). If so, nothing more is required. If not, I do not consider that the insurance policies for the period 1 July 2012 to date together with the copies of the policies are directly relevant to the proceedings and would not so order.
Item 1(e) refers to the wife’s interest in H Super Fund. If the wife is a member it is reasonable that she provide her member statements for the financial years ending 30 June 2016 and 2017.
As discussed I propose to make no order in respect of paragraphs 1(f),(g) and (h) on the basis that the wife has provided an appropriate response on oath.
Paragraph 2 seeks a raft of documents in relation to entities controlled by her but also R Pty Ltd and Y Pty Ltd. Whilst there is some contention to the extent of the wife’s involvement in these entities I am satisfied that they are not the alter ego of the wife and that the wife’s position as a former shareholder of a minority shareholding in a company that does not trade would not entitle the wife to seek from R Pty Ltd the range of documents as requested.
After some further consideration it appears that Y Pty Ltd is the superannuation trustee company. It is not an entity controlled by the wife and she would have no ability to unilaterally provide documents even were they to be necessary in circumstances where the issue is the extent of the wife’s interest in the superannuation fund not the details of the trustee company where the wife is one of five directors.
To the extent that it remains an issue, the parties have agreed that any valuations required should be at their joint and equal cost.
I do not propose to make a formal order in the sense that it is now a matter of record that each of the parties agree that any property that is to be the subject of valuation, the cost of same should be shared between them.
I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 21 December 2017.
Associate:
Date: 21 December 2017
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