Phillips and Phillips (No. 2)

[2008] FamCA 676

FAMILY COURT OF AUSTRALIA

PHILLIPS & PHILLIPS (NO. 2) [2008] FamCA 676

FAMILY LAW – PROPERTY—objection to subpoena—inspection or copying—abuse of process—fishing – Rules 15.26 and 15.31 —Parties granted leave to inspect subpoenaed documents—wife to file and serve particulars of 79A application—husband relieved from compliance with filing material until wife complies with order

APPLICANT: Ms Phillips

RESPONDENT: Mr Phillips

FILE NUMBER: BRC 10818 of 2007

DATE DELIVERED: 13 June 2008

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Barry J

HEARING DATE: 12 June 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Page of Senior Counsel appeared for the Applicant Wife

SOLICITORS FOR THE APPLICANT: Andrew Wiltshire Family Lawyer

COUNSEL FOR THE RESPONDENT: Mr S. Williams of Counsel appeared for the Respondent Husband

SOLICITORS FOR THE RESPONDENT: Philippa Power Solicitor

Orders

IT IS ORDERED THAT:

1. All parties be given leave to inspect subpoenaed documents within twenty-one (21) days.

2. Within twenty-one (21) days of inspection of the subpoenaed material the Wife’s legal representatives are to file and serve full particulars of her claim in respect of the section 79A application to set aside the consent orders dated 31 January 2002 and the Binding Financial Agreement dated 31 January 2002 pursuant to Section 90K.

3. The Husband is to be relieved from compliance with the Family Court Rules with respect to filing any further material until the Wife complies within paragraph 2 of this Order.

4. Leave given to all parties to apply to a Registrar for the re-listing of this matter.

5. Costs reserved.

IT IS NOTED that publication of this judgment under the pseudonym Phillips & Phillips is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 10818 of 2007

MS PHILLIPS

Applicant

And

MR PHILLIPS

Respondent

REASONS FOR JUDGMENT

1. On 5 March this year, for reasons given at the time, I made orders inter alia in the following terms:  Paragraph 1:

   "The husband's legal representatives to provide the wife's legal representatives within seven days with the following:

   (a)  documents specified in the letter from the wife's solicitors to the husband's solicitors of 27 February 2008, save that such financial statements shall be for the five years preceding 31 January 2002;

   (b)  documents specified in paragraph 8.1 of the letter of Mr [C], chartered accountant, to the wife's solicitors on 27 February 2008."

   Paragraph 2:

   "Leave given to the wife's legal representatives to issue subpoenas by 4.00 pm on 7 March 2008 with such subpoenas to be returnable by 4.00 pm on 28 March 2008."

2. In relation to compliance with the terms of paragraph 1, I am informed by senior counsel for the applicant wife that her legal representatives were merely informed that such documents no longer exist, however, a letter from the husband's solicitors to the wife's solicitors dated 5 March, exhibit 2 in these proceedings, would appear to contradict this.  I am not sure what the correct position is.  I simply mention that as an aside.  The issue before the Court on today's date relates to the terms of paragraph 2 of those orders.

3. Pursuant to that order, six subpoenas were issued by the wife's legal representatives.  They were filed on 7 March.  Three were to various banks, the ANZ Bank, St George Bank and Suncorp Metway, seeking documents for certain companies and the husband himself.  Two subpoenas were to city councils, one to a Queensland City Council and one to a New South Wales City Council and one was sought for documents from a firm of accountants. 

4. I refer briefly to the scope of the subpoenas.  The subpoenas to the three banks were more or less in the same terms.  In the left-hand column of the subpoena is a series of item numbers, one down to six, and the next column, the middle column, is the date and they all show the same dates for the period for which the documents are sought, from 1 July 1998 to 30 June 2002.  The documents to the banks relate to the security registrar and all security documents related to the above named husband including, but not limited to the company's businesses entities, V Pty Ltd, LA Pty Ltd, A Pty Ltd.  I will not go into the full details but the second lot of documents by way of example to the bank was the authority to operate any current account or savings account or any money on deposit.  The third document is the file including but not limited to all correspondence documents, computer records, memorandums, papers and writings in relation to accounts held and/or dealings, diary notes, etc.

5. In relation to the documents sought by the two Councils, again they were in similar terms and covered the same period.  They sought all approvals, preliminary approvals, assessments, notes relating to approvals, preliminary approvals, supplementary material relating to all applications and approvals, including all reports, notes, agenda notes, agenda items; with respect to reports, applications and approvals, etc.  It is a rather verbose way of stipulating the documents in relation to the husband and, once again, the three companies. 

6. In relation to the firm of accountants, documents were sought over that stipulated period concluding on 30 June 2002 and, in effect, they want the share register, the register of directors, ledgers, journals, minute books, loan agreements, trust deeds, etc.  A series of eight stipulated sets of documents.  All the recipients of the subpoenae have complied, the documents are in the Court’s custody.  No inspection has taken place for reasons soon to become obvious. 

7. The brief background history of this matter is that consent orders for property settlement were entered into by the husband and wife in late January 2002.  At the same time a binding financial agreement was executed.  The wife filed the current application in September last year seeking to set aside the consent orders pursuant to s.79A and seeking to set aside the binding financial agreement pursuant to s.90K.  The matter has been before the Court on a number of occasions since the first return date on 5 November last year.

8. Shortly after the application was filed the husband's legal representatives moved to summarily dismiss the wife's application.  My attention has been drawn to paragraph 17 of my reasons for judgment of 5 March where I note:

   “that the orders sought by counsel as set out in Mr Wiltshire's letter, to which I have made reference, clearly seek financial agreements five years back from today.  Counsel ought to amend that so that it was five years prior to January 2002 when the consent orders were made.” 

9. One of the objections to the subpoenas which are sought to be set aside is that when issued the subpoenas seek disclosure of documents for the period up to 30 June 2002 when the relevant consent orders were dated 31 January 2002.  The significance of this is set out in paragraph 15 of the submissions by counsel for the husband where he observes:

   “without having to analyse each and every category of documents sought by the wife, each subpoena issued is fundamentally flawed in at least two respects and liable to be set aside as a consequence:

   (a) the documents sought to be produced extend for a five month period following the filing of consent orders in this Honourable Court.  Those documents simply cannot be relevant.  So much was made clear by your Honour at reasons, paragraph 17;

   (b) the only entity to which the wife has raised the goodwill issue is [V Pty Ltd], however, she now seeks production of documents concerning the husband personally, [LA] Pty Ltd and [A] Pty Ltd.  Each of these two latter entities have different structures to and operate independently of [V Pty Ltd].  It is wrong in principle and plainly absurd to attempt to attribute any goodwill in one or both of those entities which, in any event, is denied by [V Pty Ltd].”

10. The view that I have taken is that financial statements are relevant clearly for the period to late January 2002 and such information is to be found in the financial statements for the year ending 30 June 2002.  I am assuming that separate financial statements were not produced for the entities for the period say from 1 July 2001 to 31 January 2002, but even if they were, the full financial year covering that period may well be relevant.

11. In relation to the non-financial documents it is artificial in the extreme to suggest that only documents in existence prior to 31 January 2002 are relevant.  Documents in the ensuing six months may prove to be relevant if, for example, they reveal the husband was deliberately stalling his development projects until property settlement issues had been finalised.  The documents may not reveal that but it is highly relevant to the wife's position if they do.  I have not examined the disclosure of information in the consent order document filed, if indeed such a document was filed, but the fact that the wife has focused on V Pty Ltd is not to say that other companies or entities controlled by the husband are irrelevant.  The fundamental question is: were the existence of those companies disclosed at the time and, if so, what value was attributed to them? 

12. Helpful written submissions have been received from both counsel pursuant to the directions made by Gassner R on 28 March this year.  For the husband reliance was placed on the terms of r.15.26 Objection to Subpoena:

    "If a named person or a person having sufficient interest in a subpoena:

    (a) seeks an order that the subpoena be set aside in whole or in part;

    (b) objects to the production of a document required by the subpoena;

    (c) seeks to be paid for any loss or expense relating to the person's attendance or the production of a document in compliance with a subpoena or;

    (d) seeks any other relief in relation to the subpoena the person must attend the Court on the Court date to apply for the order."

13. Rule 15.31 relates to Objections to Inspection or Copying of Document.  15.31 sub-r 1 is in the following terms:

    "This rule applies if the named person or a person having sufficient interest in the subpoena for production:

    (a) objects to the production of a document identified in the subpoena or;

    (b) objects to a document identified in the subpoena being inspected or copied by any of the parties."

    15.31(2):

    "The person must, as soon as practicable after being served with the subpoena and at least 10 days before the Court date give written notice of the objection or other order sought in accordance with Pt F of the subpoena to:

    (a) the registry manager;

    (b) the named person if applicable;

    (c) the other parties and

    (d) any Independent Children's Lawyer."

14. In paragraph 3 of the submissions on behalf of the husband, the basis for setting aside is particularised as:

    "(a) lack of relevance;

    (b) and or in the alternative as they constitute an abuse of process on the premise they are oppressive;

    (c) further, or in the alternative as they constitute an abuse of process on the premise they constitute fishing.”

15. For my own part I would have thought that relevance would principally be determined after the documents are inspected.  Those in the best position to consider issues of relevance would, of course, be the respective legal practitioners.  As to the submission they constitute an abuse of process on the premise they are oppressive, one could ask the rhetorical question, oppressive to whom?  This type of objection is normally taken by a recipient of a subpoena on the basis the recipient would have to spend an unacceptable amount of time searching records to locate the documents in existence, or there is insufficient specificity in relation to the documents sought.  Any prejudice to the husband, because his legal advisers have to trawl through thousands of pages of documents, can be met, I would have thought, with an order for costs if deemed appropriate.

16. As to the claim that the subpoenas constitute an abuse of process on the basis that it amounts to fishing, I referred counsel to a decision of the Full Court of the Federal Court in the matter of Bierly v Beagle Management 105 FLC 136 -143 where the Court observed:

    "Even if the notices to produce are properly to be regarded as fishing, that concept has undergone substantial rethinking in this Court in recent years.

    In a number of cases it has been pointed out that O 15A r 6, Discovery Before Action, expressly contemplates what once might have been castigated as fishing.  It would be incongruous if the power to order discovery were less extensive in favour of a party to a proceeding properly brought to the Court then in favour of someone unable, for lack of evidence, to mount a case.  Also one should not lose sight of what the majority of the High Court in Grant v Downs (1976) 135 CLR noted as public interest:

    "Which requires that in the interests of a fair trial litigation should be conducted on the footing that all relevant documentary evidence is available.

    The applicant suggested the rule imposes a requirement that to avoid the stigma of fishing a party must already be in possession of some evidence before issuing a notice to produce or, presumably, any other compulsive interlocutory process but, historically, the concept of fishing was not concerned with the prior possession of evidence but rather that there was a prior pleading which raised issues which evidence sought by the process would be relevant.”

17. At paragraph 15B of the submissions by the husband's counsel he has, as I have previously quoted, raised the issue that it is only V Pty Ltd which is relevant and the subpoena seeks documents from two other corporate entities.  If the inspection reveals the husband has an interest of some kind in the entities, LA Pty Ltd and A Pty Ltd, they may well be relevant.  It is not a matter which I am prepared to speculate on at this point in time.  The proof of the pudding will be in the inspection. 

18. I accept the force of the submissions made by the husband's counsel, that the wife's case has changed and changed significantly since the filing of the application back in September last year.  Initially a claim of miscarriage of justice was mounted on the basis the valuations of real estate were below market value.  As I understand the position, that approach is no longer pursued.  The claim was then made by the wife that the company, V Pty Ltd, which as I understand the position, was the husband's property development entity, was undervalued as at the time of the consent orders on the basis that no value was attributed to goodwill. The husband immediately engaged a forensic accountant, Mr O, who ventured the opinion that as the company had not made a profit for the three or so years prior to the date of consent orders, it was likely it had no goodwill.

19. The wife's claim at the present time appears to have been succinctly summarised by counsel for the husband where he observed the wife's case is now presented as a case to be inferred from the husband's financial circumstances generally at the time of signing consent orders.  What to make of the change of tack in the presentation of the wife's case is not a matter I have to determine at this point in time, suffice it to say she is at liberty to re-plead and assert that this is the changed basis upon which she brings her application.

20. I note at paragraph 25 of the submissions by counsel for the wife, he says:

    "The categorisation of particulars as going to the goodwill is probably an error.  It is accepted that the documents in possession of the objects of the subpoena will not go to the issue of goodwill but they will contain facts from which the suppression of false evidence or other factors necessarily to be provided to the wife in the course of the making of this settlement can be obtained."

    It is an assumption that counsel makes that the documents will contain those facts, but it is sufficient that they may contain those facts, to my mind it brings the documents which have been subpoenaed into the relevant category. He then concludes it is from these documents that the wife may well obtain an opinion as to goodwill.

21. At paragraph 5 of those submissions counsel says:

    "The wife asserts clearly that she relied upon representations to her by the husband as to the value of the property and the likely profitability of a property venture that led to the execution of the orders and the agreement by her."

    At paragraph 13 the wife's counsel submits:

    "It is also important to note that leave was obtained from the Court to issue the subpoenas in the context that:

    (a) the husband was seeking to have the wife's substantive application struck out summarily;

    (b) the husband had indicated to the Court and the wife that he was prepared to provide to the wife whatever documents or information she required,  see submissions of Kirk SC before Barry J of 14 December 2007 and 5 March 2008;

    (c) the husband indicated that he no longer retained documents dating back to the period sought by the wife;

    (d) there was an acceptance that there was a non-party disclosure regime provided by the Family Law Rules, see r 13.33 and;

    (e) that the wife be given an opportunity to:

    (i) have documents produced under subpoena;

    (ii)inspect the documents so produced prior to her being required to provide particulars of her substantive application.

    I accept the force, in particular, of that last submission in that the orders made provided for inspection and then a re-pleading of the wife's case.

22. I can see no prejudice to the husband in allowing inspection to take place.  The husband has at all times adopted a stance that he has nothing to hide.  To his credit the husband's conduct up till now has been consistent with that assertion.  In a situation where the wife says she was not fully informed by the husband at the time of the true financial position, in the interests of justice it is not appropriate to prevent the wife inspecting the documents in the Court's custody on any of the grounds advanced on behalf of the husband, either in the initial submissions of 31 March or the submissions in reply of 12 June.  Having reached that conclusion I propose to make an order that inspection be carried out.

    RECORDED  :  NOT TRANSCRIBED

23. Leave is given to the parties to inspect by a certain date and then within 21 days of inspection taking place the wife is to file and serve full particulars of her claim in respect of the s.79 application, etc..  The husband is to be relieved from compliance with the Family Court Rules in respect of filing any further material including the financial statement until the wife complies with paragraph 2 of this order.

    RECORDED  :  NOT TRANSCRIBED

    ORDERS DELIVERED

I certify that the preceding twenty three (23) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Barry

Associate: 

Date:  13 June 2008