PILOT & PILOT (SUBPOENA TO TRUSTEE)

[2012] FamCA 123

FAMILY COURT OF AUSTRALIA

PILOT & PILOT (SUBPOENA TO TRUSTEE) [2012] FamCA 123

FAMILY LAW - PRACTICE AND PROCEDURE – Subpoena filed by husband for production of the Trustees file relating to his role as Trustee and proceedings between the parties – application by Trustee to have subpoena set aside – subpoena set aside

FAMILY LAW - COSTS - Application by Trustee for costs – order that husband pay Trustee’s costs in respect of the subpoena

Family Law Act 1975 (Cth) ss 117(2), 117(2A), 117(2A)(c), 117(2A)(f), 117AA, 118
Family Law Rules 2004 (Cth) rr 15, 15.26

Sharp v Dalton (1990) FLC 92-167
Botany Bay Instrumentation and Control Pty Ltd and Anor v Stewart and Anor (1984) 3 N.S.W LR 98
Hatton v Attorney General of Commonwealth of Australia, Commonwealth Bank of Australia, and the Commonwealth Development Bank of Australia [2000] FamCA 892
Woodley & Time and Anor [2008] FamCA 162
Greedy v Greedy (1982) FLC 91-250
Oliver v Oliver (No 2) [2010] Fam CAFC 174

APPLICANT: Mr Pilot

RESPONDENT: Ms Pilot

FILE NUMBER: HBF 1990 of 1999

DATE DELIVERED: 15 March 2012

PLACE DELIVERED: Hobart

PLACE HEARD: Launceston

JUDGMENT OF: Benjamin J

HEARING DATE: 22 February 2012

REPRESENTATION

COUNSEL FOR THE HUSBAND: Roger Murray

SOLICITOR FOR THE HUSBAND: Murray & Associates

COUNSEL FOR THE WIFE: Mr Michael Foster

SOLICITOR FOR THE WIFE:	Murdoch Clarke
COUNSEL FOR THE TRUSTEE:	Mr John Lewinski

SOLICITOR FOR THE TRUSTEE: Butler McIntyre & Butler

Orders

1. The subpeona issued 6 February 2012 and addressed to Mr CC is set aside.

2. The husband pay the legal costs of Mr CC in respect of the subpoena.

3. Reasons for these orders be reserved.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Pilot v Pilot (Subpoena to Trustee) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT HOBART

FILE NUMBER: 1990 of 1999

Mr Pilot

Applicant

And

Ms Pilot

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. Mr Pilot (“the husband”) and Ms Pilot (“the wife”) have been engaged in property proceedings over many years.  The final hearing of their property proceedings ran over many weeks and property orders were made in late 2010.  Those property orders included the appointment of a trustee for the sale of a financial asset.  Initially that trustee was Mr E however, by way of a subsequent order, Mr CC became the trustee pursuant to the orders.

2. On 13 December 2011 the husband filed an application in a case seeking:-

   (a)an order setting aside the acceptance of a tender by the Trustee for the sale of the U Street properties to the wife;

   (b)a declaration that the Trustee accept the husband’s tender;

   (c)an order that the husband settle the purchase of that tender;

   (d)an order that the Trustee proceed with the auction sales of Lots 8 and 9 at K;

   (e)an order that the wife make available for collection by the husband personal property at W Property;

   (f)an order that the Trustee make recommendations in relation to the Z Street debts;

   (g)an order that the Trustee finalise certain financial statements;

   (h)an order that the Trustee make recommendations regarding alleged liabilities identified in order 9 of orders of 11 August 2010;

   (i)an order the Trustee make further recommendations over a particular period of time;

   (j)an order that the time for the husband to remove rock from Lot 4 at K be extended;

   (k)a costs order.

3. That application was listed for hearing before me at Launceston on 22 February 2012.

4. The wife filed a response to that application and sought other orders.

5. On 6 February 2012 the husband filed and subsequently served a subpoena on Mr CC (“the Trustee”) seeking the production of:-

   The file (paper and electronic) of [the Trustee] relating to his role as Trustee and proceedings between [the parties].

6. The Trustee objected to the subpoena and sought to have it set aside.  Shortly before the hearing the husband amended his application which he set out in Exhibit ‘H1’.

7. When the dispute between the husband and wife came before the Court on 22 February 2012 the Trustee sought to have the subpoena set aside and sought an order for costs.

8. The position of the wife was initially ambivalent in relation to the subpoena but then she adopted a view that it ought to be set aside.

9. At the commencement of the application the issues between the husband and wife had narrowed to a limited number of contentions, namely; that arrangements be made for the husband to collect the personal property from the wife (consent orders were made later that day) and that time be extended for the husband to remove rock from Lot 4 at K (consent orders were made in relation to that issue later that day).  The only matters left outstanding were the questions of the subpoena, some information regarding litigation between entities of the parties at K, some claims by the wife in relation to U Street and Lot 4 at K (which I referred to the Trustee) and costs.

10. Notwithstanding these circumstances the husband pursued his application that the subpoena, to the lesser extent, be permitted and that the Trustee provide that material and that part of the cost of the Trustee would then be met by the parties monies which was being held by the trustee. 

11. The solicitor for the Trustee tendered a letter from the solicitor for the husband to the Trustee dated 14 February 2012.[1] 

    [1] Exhibit ‘T1’.

12. In the letter to the Trustee the solicitor for the husband made a number of assertions which included the following:-[2]

    [2] Ibid.

    … Although the relationship may not have reached the point of open antagonism, it has certainly reached the point where there would appear to be a mutual level of distrust and a lack of respect which, at the least, add to the long term difficulties between the parties in attempting to work through the balance of issues in a fair and cost effective way for the benefit of both [the husband and wife] which was no doubt one of the primary reasons the court determined to appoint a trustee in the first place.

    …

    My client [the husband] has very strongly felt that whether it is because of any dislike you may have developed for my client or because you may have allowed yourself to be influenced by [the wife] who, for the most part, would seem to have been representing herself during the time of your appointment, that you may have fallen into error in the sense that you may have crossed the line from being independent and impartial to arguing [the wife’s case].  On my instructions, my client has not and is not suggesting that if that has to any extent occurred that it had been intentional on your part but he does feel that he has been placed at a disadvantage.

    The main purpose of seeking copies of the above correspondence was to attempt to put the concerns of my client at rest (emphasis added).  Of course your refusal to provide such copy correspondence has the effects of raising my client’s concerns.

    …

    [The husband] very strongly has the view that the manner in which the initial trustee [Mr E] and then yourself carried out the roles of trustee has caused very significant financial loss to the [Pilot] group and therefore to [the husband] but also [the wife].

    …

    It is not my client’s intention to de-rail the settlement of the matter for lengthy and expensive arguments as to the above types of issues.  However, I have firm instructions from my client that he reserves the right, once the final accounting has been done, to pursue concerns against the trustee, and if successful, to seek any appropriate damages/compensation.

13. The submissions on behalf of the husband were that the material was needed so that the husband could satisfy himself that the Trustee was acting in an even handed way. 

14. On the material before me it is clear that prior to the concession made by counsel for the husband at the start of the application, there may have been some relevance in terms of material to be produced by the Trustee, such as material in respect of the sale of the U Street properties and the putative auctions sale in respect of two of the K properties and the issues regarding Lot 4 at K.  The question I would have had to decide was whether there was ‘potential relevance’ but of course that potential relevance evaporated with the change of position by the husband at the commencement of the hearing of the application.

15. Even though there may have been potential relevance for some material, the subpoena, even as sought to be varied, was far too wide.  On that alone the subpoena ought to have been set aside.

16. The submissions of the solicitor for the husband and the letter of 14 February 2012 makes it clear that the purpose of the subpoena was far more than for the purposes of the proceedings. 

17. There is a clear power for the Court to issue a subpoena (Family Law Rules 2004 (Cth) Rule 15.3). There is provision under the Family Law Rules 2004 (Cth) to object to a subpoena (Rule 15.26).

18. In asserting that the subpoena ought to be set aside the solicitor for the Trustee submitted:-

    (a)that the subpoena was not issued for the purpose of the application;

    (b)the subpoena had not been issued bona fide for the purpose of obtaining relevant evidence;

    (c)the subpoena was being used for the purpose of obtaining discovery or further discovery against the third party;

    (d)where the subpoena has been issued for the purpose which is unsubmissable, as, for example, fishing.

19. To this end counsel for the trustee relied upon a decision of Moore J R (as she then was) in Sharp v Dalton (1990) FLC 92-167 and in particular the circumstances set out by Powell J in Botany Bay Instrumentation and Control Pty Ltd and Anor v Stewart and Anor (1984) 3 N.S.W LR 98 at pages 100 to 101 where His Honour said:-

    Although a reference to the authorities makes it tolerably plain that the court will exercise its undoubted jurisdiction to set aside a subpoena in a variety of cases, as for example:

    1.unless the subpoena was issued for the purpose of a pending trial, hearing or application …

    2.where to require the attendance of a witness would be oppressive …

    3.where the subpoena had not been issued bona fide for the purpose of obtaining relevant evidence and the witness to whom the subpoena had been addressed was unable to give relevant evidence …

    4.where the subpoena has been used for the purpose of obtaining discovery or further discovery against a party …

    5.where the subpoena has been used for the purpose of obtaining discovery against a third party …

    6.where to require a party to comply with a subpoena to produce documents would be oppressive …

    7.where the subpoena has been issued for a purpose which is impermissible, as, for example, “fishing” …

1. This approach was approved by the Full Court in Hatton v Attorney General of Commonwealth of Australia, Commonwealth Bank of Australia, and the Commonwealth Development Bank of Australia [2000] FamCA 892.

2. Once the extent of the dispute was articulated by the solicitor for the husband and the solicitor for the wife it was clear the material required was of little or no relevance.  However, relevance or potential relevance is no contest.  Accordingly, the Trustee was unable to rely upon the first of the seven categories raised by Powell J, that is, that the subpoena was issued for the purpose of a pending application.  It clearly was.

3. Neither was the solicitor for the Trustee able to rely upon the second of the categories raised by Powell J, as it was clearly not a case where the subpoena would be oppressive of a witness.  Nor was the solicitor for the Trustee able to rely upon the fourth category as a basis to object to the subpoena as the Trustee in this case was clearly not a party to the proceedings.

4. The solicitor for the Trustee asserted that the subpoena had not been issued bona fides for the purpose of obtaining relevant evidence in respect of the application.  He submitted that “although it did not fit neatly into that category it was open for the Court to find that, having regard to the contents of Exhibit T1, (the letter from the husband’s solicitor to the Trustee dated 14 February 2012), and in particular paragraph 10 of the letter, that the bona fides associated with the issue of the subpoena ought to be questioned”.  I am satisfied that the subpoena was not issued for that purpose.  It was issued for a much broader purpose which in many ways is identified in the letter from the solicitor for the husband to the Trustee of 14 February 2012.[3]

   [3] Ibid.

5. The subpoena was endeavoured to be used to enable the husband to investigate the bona fides or otherwise of the Trustee.  That is not a basis upon which a subpoena should issue and is a basis to set aside the subpoena.

6. The solicitor for the Trustee relied upon the final ground upon which Powell J in Botany Bay (supra) said a subpoena could be objected to and submitted that the subpoena issued by the husband was for the purposes of a fishing exercise.  He asserted that if the husband’s position was to allege bias on the part of the Trustee, then he ought to make a separate application to the Court to enable the Trustee to be given an opportunity to defend his professional credibility and ought not be disempowered from continuing the job he had been doing.  I am satisfied the subpoena was issued by way of a ‘fishing expedition’ and for the purpose of obtaining discovery against the Trustee (the third party).

7. If the husband has evidence that the Trustee is acting in breach of the orders or contrary to the provisions of equity or any trustee laws it is open for the husband to bring that application to the Court supported by evidence.

8. It is not open for the husband to use the subpoena process in this application to facilitate further proceedings.

9. The solicitor for the husband claimed that the husband ‘was loosing faith in the Trustee and that the Trustee had an obligation to have a good relationship with the parties’.  Whilst a good relationship is useful it misinterprets the role of the Trustee.  The role of the Trustee pursuant to these orders is to collect the assets, sell them and distribute them in accordance with the orders made by this Court.

10. The Trustee is obliged to comply with the court orders and to comply with the relevant State trustee legislation and the code of behaviour in relation to his profession as a trustee and as an accountant.

11. It is not akin to a professional relationship between a client and a professional person, as asserted by the solicitor for the husband during submissions.

12. Accordingly, the application to set aside the subpoena must succeed.

13. At the conclusion of his submissions an oral application was made by the solicitor for the Trustee for his costs arising out of the husband’s subpoena.

THE RELEVANT LEGAL PRINCIPLES TO BE APPLIED

1. The general rule in relation to costs is that each party to the proceedings should bear his or her own costs of the proceedings. This general rule is subject to s 117(2), s 117AA, s 118 of the Act. A court may make such orders as to costs, whether by way of interlocutory order or otherwise, as the Court considers just. The Court is required not only to consider whether there are circumstances to justify the making of costs orders, having regard to s 117(2A) which sets out an inclusive list of the matters the court should have regard to. The determination of legal costs is a matter of judicial discretion.

2. In Woodley & Time and Anor [2008] FamCA 162 I said:-

   30.In Brown v Brown (1998) FLC 92-882, Kay J said at pp 85,346 to 85,347:

   “The obligation under s 117(2A) is that the court shall have regard to the various matters set out thereunder. This is in contrast to the previous provisions under which costs orders were made, namely, under the Family Law Regulations and in particular reg 173 which required that the court may in making an order take into account various matters. The movement from a discretionary consideration to a mandatory consideration is a matter in my view of some substance.''

   31.In the absence of their being circumstances that justify the court making an order for costs, then s117(1) provides that each party will bear his or her own costs of the proceedings under the act.

   32.The interpretation to be applied to s117 and the inter relationship of s117(1) and s117(2) was considered by the High Court in Penfold v Penfold (1980) FLC 98-800. In this case Stephen, Mason Aickin and Wilson JJ, said at 75,053-75,054:

   “It is an accurate description of sec. 117(1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to sec. 117(2). As subsec, (1) is expressed to be subject to subsec. (2), the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.”

   “Subsection (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently…we do not agree with the suggestion…that an order can only be made under sec. 117(2) in a ‘clear case’” .

   “Subsection (2) does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when the costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised.”

   “Moreover, the transcript shows that it was only after the respondent’s financial position had been investigated at the hearing that, in answer to questions put by the judge in cross-examination, he admitted that he could afford to pay the increased maintenance which was ultimately ordered. The respondent had filed a Form 19…(which) presented a picture of the respondent as an insolvent, a man whose liabilities exceeded his assets. It made no mention of the very valuable assets which he owned and in which he had an interest...” (at 75,054).

   “Consequently, there was ample material from which the judge could find that there were circumstances justifying the making of an order for costs. The facts that the appellant failed in relation to the trust and the matrimonial home, and that the vacation judge dismissed the interlocutory application, though matters which are of relevance, are not of sufficient strength to deny the conclusion that there were circumstances justifying the making of the order.”

   33.The case of Penfolds was discussed by Justice Wilson in the High Court decision of Mallet v Mallet (1984) FLC 91-507 (with whom Gibbs CJ, Mason, Dean and Dawson JJ agreed at pp 79,123-79,124). Penfolds case also made it clear that s117(2A) “requires a finding justifying circumstances as an essential preliminary to the making of an order”. It is clear that the court has a wide discretion and that beyond this there is no “additional or special onus” on the applicant for costs which requires the court to make a preliminary finding that special or exceptional circumstances exist before making an order for costs[4].

   34.By virtue of s 117(2A), in considering what order (if any) should be made under s 117(2), I am required to have regard to the matters set out in s117(2A) (a)-(g) in so far as they are relevant. The factors set out in the subparagraphs do not comprise of a closed list of factors, because s117(2A)(g) includes “such other matters as the court thinks relevant”. I need to consider each of the various factors, subject to their relevance, however, in PBF (as Child Representative for AF (Legal Aid Commission of Tasmania) v TRF and LKL (2005) FamCA 118 the Full Court held at paragraph 41:

   “…Nowhere in subsection 2(A) or elsewhere in section 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subsection 2(A).  As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.”

   35.In the matter of  I and I (No 2) FLC 92-625, the Full Court at p 82,277 said:

   “that the relevant matters in s 117(2A) “must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs.” 

   36.In this case Nicholson CJ, Ellis and Baker JJ declined to follow the approach adopted in the decision of McDonald and Mc Donald (1994) FLC 92-508 in relation to the question of costs. In that earlier case Mushin J had said at p 81,271;

   ``In the first instance it is important to note that the principal proceedings concerned questions of custody. As between parties in the strict sense of that word, it is rare for an order for costs to be made in such proceedings. Circumstances such as a totally unmeritorious case on one side, an attempt to vary a custody order which does not even establish a prima facie case, the withholding of evidence, the giving of false evidence and like matters are common bases for such an order. However, where no factor of this type exists, there would usually need to be a very significant disparity in financial circumstances between the parties before a costs order was made.''

   37.The Full Court in I and I (No 2) above, declined to follow this approach and held at p 82,277;

   “With respect... we see nothing in the provisions of s 117 to justify the approach to the question of costs in custody or any other proceedings suggested by him. The matters to which he referred are matters which, in an appropriate case, would be taken into account in determining whether the circumstances justified the making of an order for costs in a particular case. However, whether such matters exist or not, the other relevant matters referred to in s 117(2A) must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs. The financial circumstances of the parties is but one of those matters and those circumstances must be taken into account whether or not there is a very significant disparity in financial circumstances between the parties.''

   [4] Jensen and Jensen (1982) FLC 91-263.

1. Section 117(2A) of the Family Law Act 1975 (Cth) provides:-

   (2A)  In considering what order (if any) should be made under subsection (2), the court shall have regard to:

   (a)the financial circumstances of each of the parties to the proceedings;

   (b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;

   (c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;

   (d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

   (e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;

   (f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and

   (g)such other matters as the court considers relevant.

1. It is apposite to note the comments of the Full Court in Greedy v Greedy (1982) FLC 91-250 at page 77,382 where they said:-

   There may be situations where refusal to negotiate, to make an offer or to put forward an alternative order may be a factor justifying an order for costs.  The policy of the Act is to encourage conciliation, and failure of a party to take part in negotiations in a general manner may contribute to delay and cost and obstruct the proper resolution of the matter … .

2. As a single judge of appeal exercising an appellate jurisdiction of the Family Court, May J, in Oliver v Oliver (No. 2) [2010] Fam CAFC 174, said at paragraph 39:-

   It was held In the marriage of Greedy, that “[a]n award of costs ought to bear some relation to the conduct of the proceedings by the parties or to their relative circumstances at the time of the application and hearing of the matter.”

3. The principles set out in Greedy remain good and relevant law and I have had regard to those principles.    

4. The husband was unsuccessful in relation to his subpoena seeking the production of the Trustee’s file relating to his role as trustee and the proceedings between the parties.

5. In respect of the costs application I have considered and had regard to the financial circumstances of each of the parties.  I have considered those circumstances in the light of the findings and outcomes as a result of the primary proceedings.  The husband and wife each now have a significant quantity of assets, measured in the millions of dollars.  Further, each of the parties, in the past, has shown an ability to derive income from assets, both by way of rental and development.  Each of the parties has their respective strengths and weaknesses in business, which I have discussed in my primary reasons, and to which I have had regard.

6. I am satisfied having regard to the net worth of both parties; each could meet an order for costs. 

7. Accordingly, I am, on balance, satisfied that, in the overall circumstances of this costs application, I ought to make the costs order sought by the Trustee against the husband.

I certify that the preceding forty two (42) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin delivered on 15 March 2012.

Associate: 

Date:  15 March 2012