Rahal & Rahal (No 4)
[2023] FedCFamC1F 1070
•14 December 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Rahal & Rahal (No 4) [2023] FedCFamC1F 1070
File number: SYC 7908 of 2020 Judgment of: MCGUIRE J Date of judgment: 14 December 2023 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Review of a decision – wife seeks a review of senior judicial registrar upholding objections to a subpoena issued by the wife in property proceedings – application successful and objections to subpoena are dismissed Legislation: Family Law Act 1975 (Cth) Cases cited: Baumann and Ors & Rushbrooke and Anor [2016] FamCA 905
Ryder & Lee [2009] FamCA 531
Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145
Unitingcare – Unifam Counselling & Mediation & Harkiss and Anor (2011) FLC 93-476
Division: Division 1 First Instance Number of paragraphs: 55 Date of hearing: 7 December 2023 Place: Hobart, delivered Launceston Counsel for the Applicant: Ms Winning Solicitor for the Applicant: Barkus Doolan Winning Counsel for the Respondent: Mr Dickson KC Solicitor for the Respondent: Braun Abrhams Burreket ORDERS
SYC 7908 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS RAHAL
Applicant
AND: MR RAHAL
Respondent
ORDER MADE BY:
MCGUIRE J
DATE OF ORDER:
14 DECEMBER 2023
THE COURT ORDERS THAT:
1.The wife have leave to file and prosecute an Application for Review out of time.
2.The objection to subpoena issued and directed to FF Lawyers be dismissed.
3.The documents at Court under subpoena issued and directed to FF Lawyers be released to the parties, for inspection and photocopying.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym of Rahal & Rahal (No 4) has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
MCGUIRE J:
APPLICATION
The wife Ms Rahal (“the wife”) seeks a review of orders of a Judicial Registrar made 25 September 2023 upholding objections to a subpoena issued by the wife in property proceedings where such subpoena was directed to a solicitors’ firm, FF Lawyers.
The subpoena seeks conveyancing files in respect of two purchases of real property being, firstly, GG Street, Suburb HH, New South Wales in 2014 with the purchaser being a corporate entity, L Pty Ltd and, secondly, at JJ Street, Suburb KK, New South Wales with the purchaser being P Pty Ltd.
Specifically, the documents sought are particularised in the subpoena thus:
1.The original or a copy of the following documents in relation to the purchase of [GG Street], [Suburb HH] NSW (folio identifier …) by [L Pty Ltd] […], with contracts exchanged [late] 2014 and the transfer dated [early] 2014:
(a)Any letter, contract, retainer, agreement or other document appointing [FF Lawyers] as the conveyancers to act (or in any other capacity) in respect of the purchase of the property by [L Pty Ltd].
(b)All documentation identifying the payment of monies to [FF Lawyers] and/or [L Pty Ltd] (or to any nominee of either of them), or the receipt of any such monies, arising from the purchase of the property.
(c)All correspondence between any representative of [FF Lawyers] and [L Pty Ltd] (or any nominee of either of them) and any third party or business entity, including conveyancers, real estate agencies, and lawyers, regarding the sale of the above-mentioned property during the period [mid] 2014 to [mid] 2015.
(d)[FF Lawyers’s] complete file in respect of the purchase of the property by [L Pty Ltd].
2.The original or a copy of the following documents in relation to the purchase of [JJ Street], [Suburb KK] NSW (folio identifier …) by [P Pty Ltd] […], with contracts exchanged [in late] 2013 and the transfer dated [early] 2014:
(a)Any letter, contract, retainer, agreement or other document appointing [FF Lawyers] as the conveyancers to act (or in any other capacity) in respect of the purchase of the property by [P Pty Ltd].
(b)All documentation identifying the payment of monies to [FF Lawyers] and/or [P Pty Ltd] (or any nominee of either of them), or the receipt of any such monies, arising from the purchase of the property.
(c)All correspondence between the representative of [FF Lawyers] and [P Pty Ltd] (or any nominee of either of them) and any third party or business or business entity, including conveyancers, real estate agencies, and lawyers, regarding the sale of the above-mentioned property during the period [mid] 2013 to [mid] 2014.
(d)[FF Lawyers’s] complete file in respect of the purchase of the property by [P Pty Ltd].
The objectors are the following:
(1)L Pty Ltd;
(2)Superannuation Fund 1;
(3)Superannuation Fund 2;
(4)P Pty Ltd;
(5)Mr LL (the father of the husband in the substantive proceedings)
Where the Application for Review is filed out of time, no argument was mounted in respect of the granting of leave.
The objection taken is broadly on the basis of relevance.
The husband, Mr Rahal, (“the husband”) in the substantive proceedings actively supports the objectors.
Before me, the objectors are represented by Mr Kearney of Senior Counsel. The husband is represented by Mr Dickson of Kings Counsel. The wife, pressing the release of the subpoenaed materials, is represented by Ms Winning, solicitor.
BACKGROUND
The parties married in 2009 and separated in February 2020.
There are substantive property, parenting, spousal maintenance, and child support proceedings between the husband and the wife. The matters are not yet listed for trial.
The wife is 45 years of age. She has not been engaged in remunerative employment for a number of years. She continues to reside in the former matrimonial home and has the primary care of the parties’ two children aged 12 aged 10 years.
The husband is 48 years old. He describes himself in documents filed in court as a “manager” in a business. His sworn financial statement discloses an income from all sources of gross $276,328 per annum.
The husband provides a balance sheet in the proceedings disclosing gross assets of the parties at value of $12,486,653 and liabilities of $4,057,663 or net non-superannuation property at value of $8,428,900. He pursues the sale of the matrimonial home at Suburb E valued at $11,500,000 with attendant mortgage of $3,300,000 or a net equity of $8,200,000.
The wife seeks to retain the home at Suburb E in the ultimate s 79 distribution of property (and probably unencumbered). In mounting this case she argues that the husband has not made full disclosure of his property/assets and specifically his interests in corporate and trust entities owned or operated by his father where the husband’s father is, on the available evidence, a prominent property developer.
The husband denies any legal, equitable or beneficial interest in any of his father’s corporate or trust entities.
It is uncontroversial that the husband received an injection of funds into his bank account in February 2023 in the sum of $483,275 where the wife suggests that generally this to be evidence of a beneficial interest of the husband in his father’s entities. The husband says only that it was the repayment to him of the loan. The status of the source of the injection of funds remains to be tested.
The wife argues broadly that the husband has entered into a course of divesting himself of assets and funds together with a failure to make full disclosure as a tactical ploy pending a final s 79 settlement.
Pending before me is a separate Review Application made by the husband in respect of interim orders made by the Senior Judicial Registrar on 31 May 2023 where inter-alia he seeks the sale of the Suburb E property with a consequent partial property settlement on each of the parties and hence the discharge of a current interim spousal maintenance order in favour of the wife.
At the first hearing of that Review Application on 26 July 2023, the wife indicated that she intended to join 22 entities of the husband’s father as parties to the substantive proceedings. On that basis, I considered any determination to be premature. Whilst the wife did indeed file an application to join those entities, that application has since been withdrawn.
Whilst claiming no interest in his father’s entities, the husband is a director and shareholder (50 per cent interest) in each of L Pty Ltd and P Pty Ltd being the relevant entities who were subpoenaed and to which the objectors complain.
The relevant purchases made by L Pty Ltd and P Pty Ltd were in respect of property valued at $8,250,000 in 2015 and $5,250,000 in 2014 respectively.
A court expert, Ms H, has been appointed in the substantive proceedings. The initial report has been subjected to specific questions by the wife.
It is uncontroversial that the husband reported to Ms H that any legal interest he may hold or have held in any of his father’s entities is subject to a resulting trust. It is unclear whether the husband had advanced this assertion in any affidavits previously filed by him but where the wife has consistently claimed the husband to hold legal, equitable or beneficial interest in his father’s entities.
The wife has engaged a shadow-expert, Mr MM, accountant, to assist in determining the property pool for the substantive application. His sworn affidavit on 4 December 2023 deposing thus:
[3]I was instructed by Barkus Doolan Winning in the matter of [Rahal & Rahal] to read the following:
(a)The affidavit of [Mr G] dated 14 December 2020;
(b)The valuation report of [Ms H] of [NN Valuers] dated 9 June 2023; and
(c)The answers dated 20 July 2023 to questions asked by [Ms H].
[4]I also attended a meeting with [Ms H] and [Mr G] on 31 May 2023 to review certain documents.
[5]In order to verify whether [the husband] has an interest in particular entities I require the following:
a.Copies of financial statements and income tax returns for the years ended 30 June 2014 to the year ended 30 June 2020;
b.Unit holder agreement; and
c.Land Tax Assessment Notices for the Tax Years 2014 to 2023.
[6]I require those documents for each of the following entities:
…
o.[L Pty Ltd]
…
q.[P Pty Ltd]
The husband relies on an affidavit of Mr G who is the accountant for the husband’s father’s entities. It may have been Mr G who disclosed at a meeting with Ms H and Mr MM the proposition of any legal interests held by the husband to be in the form of resulting trusts.
Where the evidence of Mr G or the husband is that any trusts/trustee companies in which the husband is a director or shareholder are “bare trusts” only in the sense of not holding assets, evidenced by no requirements to lodge taxation returns, there is also evidence of such entities borrowing funds and of a previous lodgement of a taxation return. In this respect the wife’s solicitor tendered correspondence from a lending institution dated 25 September 2017 addressed to “[Mr OO] and [Mr Rahal]” (the implication being the husband) apparently confirming the advancement of finance. The Court Expert cannot definitively explain how an alleged bare trust may be able to borrow.
THE RELEVANT LAW
It is well settled that a subpoena may be set aside on the basis of documents sought lacking “apparent relevance” with reference to a legitimate forensic purpose.
Where such matters are heard at an interlocutory stage and are not subject to full forensic testing, the “bar” as to showing relevance is consequently not set high but where nevertheless there remains an evidentiary onus on the party issuing the subpoena to establish relevance requiring a degree of specificity so as to counter allegations of mere speculation or fishing.[1] In Baumann and Ors & Rushbrooke and Anor (supra) McClelland J observed:
[38]In summary, it is not enough for a party issuing the subpoena to raise a “speculative possibility” that the documents sought would assist the resolution of the dispute. While the bar is not high, the party supporting the subpoena must demonstrate that the document(s) sought in the subpoena are of an “apparent relevance” to the issues in the proceedings. It must be more than “an outside chance” that something useful might turn up in the documents.
[39]To avoid being set aside as merely “fishing”, or as being oppressive, a subpoena must specify with reasonable particularity the documents which are required to be produced. (Footnote omitted)
[1] Baumann and Ors & Rushbrook and Anor [2016] FamCA 905.
The solicitor for the wife referred the Court to the decision of Secretary of the Department of Planning, Industry and Environment v Blacktown City Council[2] demonstrating the recent broader jurisprudence on the issue of “apparent relevance”, where the Court was of the view that to show a legitimate forensic purpose necessary for the issue of a subpoena, it is sufficient to show that the documents would materially assist on an identifiable issue in the proceedings as distinct from the requirement of materially assisting the case of the issuing party. His Honour Brereton JA observed:
[68]…The word “apparent” admits of the possibility that the documents sought by way of subpoena may not ultimately turn out to be relevant. Their apparent relevance, however, should be able to be ascertained by an examination of the description or identification of the document or documents sought in the schedule to the subpoena in light of the issues in the case, as they present themselves on the pleadings, in particulars and/or in affidavits or witness statements if they have been filed or served at the time of the issue of the subpoena.
[69]If the documents are apparently relevant and, provided that the terms of the subpoena are not unduly vague or the ambit of the subpoena is not such that it would be oppressive to comply with it, the subpoena should not be set aside.…
…
[89]I agree with Bell P, for the reasons given by his Honour, that an issuing party is not required to show that it is “likely” (or “on the cards”) that the documents sought will materially assist its case, as distinct from that it is “likely” (or “on the cards”) that they will add, in some way or another, to the relevant evidence in the case, and that the essential question is whether the documents called for are apparently relevant, or capable of providing a legitimate basis for cross-examination, in which case there is a legitimate forensic purpose for the issue of the subpoena. In my view, at least in civil proceedings and in the absence of any question of public interest immunity, no more is required to support the issue of a subpoena for production than that there is a reasonable basis for supposing that the material called for will likely add, in the end, in some way or another, to the relevant evidence in the case. This reflects the notions that the documents relate to, throw light on, or are sufficiently relevant to the dispute; that they “appear relevant in the sense that they relate to the subject matter of the proceedings”; or that they could possibly throw light on the issues in the case. Moreover, documents will add “in some way” to the relevant evidence in the case if they are capable of assisting in cross-examination, or go to credit, and notwithstanding that they are inadmissible according to the rules of evidence. (Footnotes omitted)
[2] [2021] NSWCA 145 per Brereton JA.
THE CASE OF THE OBJECTORS (SUPPORTED BY THE HUSBAND)
The submissions of the third party objectors are helpfully put in the form of written submissions complemented by oral submissions of Mr Kearney SC and Mr Dickson KC.
In respect of the L Pty Ltd purchase it is put that the husband is one of two directors and holds a 50 per cent shareholding in share capital issue but that the Company acts as trustee for a trustee company, M Pty Ltd which in turn is the trustee of two unit trusts where the units are held by Superannuation Fund 1 of which the husband’s father, Mr LL, is the sole member (and another unrelated third party entity). It is submitted that the husband has never received payment from nor is owed money from the fund and is a non-member of the fund.
A similar relationship is claimed for the husband in respect of P Pty Ltd.
It is submitted that Mr G, the Rahal family entities accountant, has sworn an affidavit and attended a meeting with the wife’s accountant and the Court Expert advising that L Pty Ltd and P Pty Ltd acted only in their capacity as trustee and that each are “bare trusts” in the sense of the holding no assets.
It is submitted that Ms H, the Court Expert, issued a report on 9 June 2023 and after meetings with Mr MM and Mr G, where she concluded inter-alia:
(i)neither the husband nor any entity in which he holds an interest has received any distribution from the [Rahal] family trust between 18 April 2009 and 4 November 2022;
(ii)the husband does not hold a material interest in any of the entities identified by [Mr G], including each of [L Pty Ltd] and [P Pty Ltd] and concluding that the entities in which the husband holds an equity interest do not operate, act solely as trustee companies, and have no assets in excess of the contributed share capital;
(iii)it would be unlikely for the husband to have an interest in the various underlying superannuation funds and unit trusts given their status as either superannuation funds or privately held interests associated with third parties (albeit [Ms H] could not definitively confirm this to be the case).
The objectors and the husband say that the wife’s speculative position in respect of the subpoena is exposed by her first informing this Court in July 2023 that she intended to join the 22 entities controlled by the husband’s father and presumably to “attack” those third parties in the substantive proceedings on the basis of the husband’s alleged interests held by the husband in those entities, but where the wife has now withdrawn those joinder applications. Specifically, the joinder applications were to include L Pty Ltd and P Pty Ltd. Further, on 4 December 2023 the wife filed a Further Amended Initiating Application where she does not seek orders against any third parties.
The implication of the above, therefore, is that the wife’s issuing of subpoena to L Pty Ltd and P Pty Ltd is not for any legitimate forensic purpose and hence an abuse of process consistent with it not being open to a party to issue a subpoena so as to determine only whether that party has a case at all[3] or simply a speculative possibility as referenced by Burr J in Ryder & Lee [2009] FamCA 531 adopting the position of Gray J in Andrew Garrett Wine Resorts v National Australia Bank Ltd (No.6) [2005] SASR 419 at 428 where it was said that:
It is not enough for the party issuing the subpoena to raise a speculative possibility that the documents sought would assist the resolution of the dispute. The party supporting the subpoena must demonstrate that the documents sought in the subpoena are of real relevance to the issues in the case. It must be more than an outside chance that something useful might turn up in the documents. (Footnotes omitted)
[3] Unitingcare – Unifam Counselling & Mediation & Harkiss and Anor (2011) FLC 93-476 at 85,856.
The objectors and the husband argue that the husband has been transparent in his disclosures as evidenced by him providing an affidavit by his father’s accountant, Mr G, as well as voluntarily providing a number of documents together with permitting the participation of Mr G in a meeting with the wife’s own accountant and the Court Expert.
THE WIFE’S ARGUMENT
The wife says that the material sought under the subpoenaed has “apparent relevance” by reason of its intended use for a legitimate forensic purpose.
The wife says that the allegations of “speculation” are met by the specificity set out in the subpoena in respect of the two transactions where the purchasers are corporate entities in which the husband is a director and 50 per cent shareholder.
Where the husband and his father’s accountant now assert any interest held by the husband to be subject to a resulting trust then the wife says that she is entitled to challenge that assertion.
The wife says that correspondence between a lending institution and the husband is suggestive of the obtaining of loans by the corporate entities of which the husband as director and shareholder and which may be inconsistent with the assertion made by the entities accountant of those purchases being “bare trusts” only.
The wife says that any apparent confirmation by the Court Expert, Ms H, accepting the husband’s accountant’s assertion of “is unqualified legal opinion”.
The wife argues that that the Court Expert has been unable to definitively explain why an apparent “bare trust” has been able to borrow substantial funds and, more broadly, that the questions proffered by the wife to the Court Expert, after the provision of her first report do not provide unequivocal responses. In support, she references the affidavit of Mr MM who was engaged to assist the wife in the settling the property pool for the substantive proceedings but deposes to requiring further information.
Specifically, the wife says that she is entitled to test the Court Expert on the basis of materials and assertions provided by the husband including in respect of the purchases made by L Pty Ltd and P Pty Ltd.
Where the husband is transparently a director and 50 per cent shareholder of two companies making significant and valuable real estate purchases, the wife says that she should be able to test the circumstances of those purchases and the husband’s status and hence where the conveyancing files are directly relevant as the best evidence.
The wife asserts that statements inconsistent with the husband’s assertion of not having any personal interest in the property in his father’s entities is contradicted by evidence given to an ICAC enquiry and relevantly in a statement made by the principal solicitor of the firm now subpoenaed to provide the conveyancing files, to the effect that the husband did, in fact, have an interest in real estate through a relevant trust. The wife says that this evidentiary inconsistency should be tested and that the subpoenaed material is consequently directly relevant.
CONSIDERATION
I accept the test for relevance is that set out by Brereton JA in Secretary of the Department of Planning, Industry and Environment v Blacktown City Council (supra) with reference to apparent relevance and legitimate forensic purpose where “… the essential question is whether the documents called for are apparently relevant, or capable of providing a legitimate basis for cross-examination, in which case there is a legitimate forensic purpose for the issue of the subpoena”.[4]
[4] At [89].
I accept that the subpoenaed directed to each of L Pty Ltd and P Pty Ltd are sufficiently particularised so as to meet any challenge of “speculation” or “fishing”.
Where the husband:
(i)concedes that he is a director of and 50 per cent shareholder in each of L Pty Ltd and P Pty Ltd;
(ii)asserts that he holds any legal interest by way of a of resulting trust; and
(iii)I accept the wife’s submission that she should be able to test the veracity of the claimed resulting trust and specifically in respect of the relevant purchases by L Pty Ltd and P Pty Ltd.
Where the Court Expert is unable to definitively explain the status of an asserted “bare trust” obtaining substantial loans in respect of the relevant purchases then I am of the view that the wife should be able to test any apparent contradiction and that the conveyancing files are therefore directly relevant.
Where the wife asserts an apparent inconsistent statement made at ICAC as to the husband’s ownership of property and where such statement is made by the principal of the firm the subject of the subpoena then the wife is entitled to test the asserted inconsistencies.
Where the wife’s own “shadow accountant” deposes to requiring further information including from L Pty Ltd and P Pty Ltd in order to give advice to the wife as to a settled property pool then the material is relevant consistent with the statements of Brereton JA in the Secretary of the Department of Planning, Industry and Environment v Blacktown City Council (supra).
I am not persuaded that the wife’s withdrawal of her application to join the husband’s father’s 22 entities is indicative of the subpoena being issued merely on “speculation”. Ultimately, it is the husband against whom the wife claims legal or equitable interest. She is entitled to pursue materials directly relevant to him.
Consequently, I am persuaded that the wife makes out a legitimate forensic purpose in the issuing of subpoena to L Pty Ltd and P Pty Ltd and hence that the documents sought are relevant.
It follows that the objections to the subpoena are dismissed and the parties and their legal representatives will have leave to inspect and photocopy the documents produced by FF Lawyers.
I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McGuire. Associate:
Dated: 14 December 2023
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