Read v Chang
[2010] FamCA 876
•9 June 2010
FAMILY COURT OF AUSTRALIA
| READ & CHANG AND ANOR | [2010] FamCA 876 |
| FAMILY LAW – PROPERTY – Trusts – Subpoena calling for production of memorandum of wishes of trust of which wife is a discretionary beneficiary |
| APPLICANT: | Ms Read |
| RESPONDENT: | Mr Chang |
| OBJECTING PARTY: | Trustees of the MR Settlement |
| FILE NUMBER: | SYC | 1553 | of | 2009 |
| DATE DELIVERED: | 9 June 2010 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Cohen J |
| HEARING DATE: | 1 April 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Schonell |
| SOLICITOR FOR THE APPLICANT: | Karras Partners Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Kearney |
| SOLICITOR FOR THE RESPONDENT: | Barkus Doolan Kelly |
| COUNSEL FOR THE TRUSTEES OF THE MR SETTLEMENT | Mr Sirtes SC |
| SOLICITORS FOR THE SAID TRUSTEES | Bartier Perry |
Orders
The application of the trustees to set aside paragraphs 2 and 3 of each of the subpoenas issued on behalf of the husband to the proper officer , Z Pty Limited and to the proper officer M Pty Limited and filed and 23 November 2009 is dismissed.
Leave is granted to the husband to personally and thorough his legal advisors inspect the documents produced to the Court in answer to the subpoenas referred to in Order 1 after he has filed and served on the wife, Z Pty Limited and M Pty Limited a written undertaking to the Court in proper form that he will not disclose any of the contents of or effect of the documents produced in answer to the subpoenas referred to in Order 1 to any person or persons other than his legal advisers or as is reasonably necessary for the conduct of the proceedings herein.
Leave is granted to the wife to personally and through her legal advisors inspect the documents produced to the Court in answer to the subpoenas referred to in Order 1 after she has filed and served on the husband, Z Pty Limited and M Pty Limited a written undertaking to the Court in proper form that she will not disclose and of the contents of or effect of the documents produced in answer to the subpoenas referred to in Order 1 to any person or persons other than her legal advisors or as is reasonably necessary for the conduct of the proceedings herein.
Costs are reserved.
IT IS NOTED that publication of this judgment under the pseudonym Read & Chang and Anor is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 1553 of 2009
| MS READ |
Applicant
And
| MR CHANG |
Respondent
And
| TRUSTEES OF THE MR SETTLEMENT |
Objecting Party
REASONS FOR JUDGMENT
These proceedings are to decide an issue which, I have been informed by Counsel, has not been previously considered in the Family Law context of disputes over property.
The wife is one of a class of beneficiaries of a discretionary trust which held more than $630 million on 30 June 2006 after it had an increase of $22 million in that financial year. I do not know now what the trust is now worth, but it is probably significantly more that $630 million. The wife’s interest as a discretionary beneficiary cannot be said to have vested. At best it has contingently vested. She may be entitled to share in periodic distributions of income and/or capital and, if she is still living, on final distribution of the trust assets, if any, when the trust is wound up at the latest in 2031. She is now 50 years of age. Currently there are 7 people who have what might also be termed vested discretionary interests meaning that she is a member of an existing class of which some or all the members, at the discretion of the Trustees, may benefit under the trust.
The terms of the trust deed are known to the husband and wife. The wife has, so far, received about $18 million in distributions. In 2009 she received more than $2.9 million. There is a well defined pattern of increasing annual distributions to the wife over many years. The husband wishes to be able to better appreciate and therefore better inform the Court what the future is likely to hold for the wife in respect of discretionary distributions and on winding up. The wife knows no more than he does. However, the Trustees admit to holding a document or documents provided by the instigator and source of capital of the trust, Mr Read Snr, her grandfather, for the Trustee’s guidance in administration of the trust. Such documents, each known as a “memorandum of wishes” or “wish letter”, said to not be binding on the Trustees, may have influenced and may in future influence them in making distributions and in deciding what part of the fund is preserved until winding up of the trust. As I shall demonstrate later, there is at least a tendency to lean toward the view that this type of expression of wishes is to some extent binding on the Trustees. The Trustees acknowledge that they should consider it and have in the past admitted they have been influenced by it, but argue they are not bound by it.
The husband has issued subpoenas, one to each trustee. Inter alia, each seeks production in these terms;
2. All memorandum of wishes and/or memorandum of preferences and/or letter of wishes or like documents signed of [Mr Read Snr] relating to the [MR] Settlement.
3. All memorandum of wishes and/or memorandum of preferences and/or letter of wishes or like documents signed by [Mr MR] relating to the [MR] Settlement”.
There may be such documents from Mr MR that are intended to effect the wishes of Mr Read Snr. Mr MR was a friend of Mr Read Snr. He was the original settler of the trust by the provision of a very small sum of money to institute it.
The Trustees have produced the documents but have applied to set aside these paragraphs in each subpoena. Not surprisingly, the husband has defended this application and seeks leave to inspect the relevant documents.
At the heart of the dispute between the husband and the Trustees is the Trustees claim that, in particular, the memorandum of wishes should not be disclosed because it does not bind them and, is in any event confidential. Senior Counsel for the Trustees submitted that the subpoena in its relevant aspect constitutes a fishing expedition and casts its net too wide because the potential for relevance of any memorandum of wishes could only be speculative. He argued that decisions in State Supreme Courts of Australia, including a decision in Hartigan Nominees Pty Ltd & Anor v Rydge (1992) 29 NSW LR 405 on the memorandum of wishes of Sir Norman Rydge, and the Courts of England should be followed. It is argued that, for much the same reasons the courts have refused to permit trust beneficiaries to gain access to a memorandum of wishes, the Family Court in these s 79 proceedings should refuse access to the husband.
In White and Tulloch v White (1995) 19 Fam LR 696 the Family Court considered a similar issue. I regard myself as bound by its decision. The issue on it which remains is whether it binds me in these proceedings. I brought this decision to the attention of Counsel for the parties during the hearing but, unfortunately, little attention was devoted to it in argument. White and Tulloch v White involved a subpoena to the mother of a party to s 79 proceedings to produce documents including the mother’s will, prior wills and evidence of her financial standing. The mother’s objection to production was on the grounds of relevance. I was the Judge at first instance and ordered production and permitted inspection by the party issuing the subpoena. On appeal, the Full Court found at p.706.25 that “the ultimate criterion is whether the evidence is, or may be, relevant to the just and equitable process under s 79. In the end, relevance must depend upon the nature of the claims being put forward or the facts of a particular case.” and held that the current will of the mother, in the circumstances which existed, should be disclosed but not the other documents because they had not been shown to be sufficiently relevant. In coming to this conclusion, it considered and did not dismiss as inconsequential, the invasion of privacy involved in disclosure and the “oppressiveness” involved in having to disclose documents which may have ultimately been “of no more than marginal relevance”
My understanding of the meaning of White and Tulloch v White is that where documents are the subject of a subpoena and those documents are about no more that an expectancy, they must be shown to be likely be found to be relevant with a degree of relevance which is more than marginal and is likely to allow the document to become a part of the evidence which will actually effect the orders made under s 79 or, as the Full Court quoted at p.703.20 from a line of authority commencing with Waind v Hill [1978] 1 NSWLR 372, “sufficiently likely to ‘add in the end to the relevant evidence in the case’”. In saying this, the Court seems to have recognised that if there is such relevance, any invasion of privacy will be insufficient to warrant a refusal to force disclosure. If the documents are insufficiently relevant or insufficiently likely to effect the ultimate outcome of the proceedings, the invasion of privacy inherent in disclosure and in some cases the inconvenience of deprival of working documents will be regarded as oppressive and disclosure should not be required.
I cannot discern any difference for relevant purposes between an expectancy arising from a discretionary trust and that arising from a current valid will of a living testator. However, one cannot overlook the possible difference or similarity between a discretionary trust and a supposedly non-binding memorandum of wishes and such things as revoked wills of the same testator or other statements or actions of that testator which might be used to prove whether the testator has demonstrated any consistent testamentary intention and, therefore, whether he or she is likely or unlikely to change a current will.
The first issue which comes to mind in making the comparisons for that purpose between a memorandum of wishes and the terms of a discretionary trust or of unrevoked wills or of revoked wills is raised by Kirby P, as he then was, in his dissenting judgment in Hartigan Nomineees v Rydge. His Honour’s approach was to elevate the memorandum of wishes which I am dealing with to much the same force and effect as the trust deed itself. He held it is a trust document to which each member of a class of beneficiaries is entitled to have access. He regarded the memorandum as supplementary to the trust deed itself. He held that such persons are entitled to have the Court supervise the actions of trustees and it should not impose the limit which seems to have previously been imposed on supervision by the Court that the person seeking it must have evidence of breach of trust obligation by a trustee to gain access to further evidence which might tend to prove breach. This approach assumes that a memorandum is to some extent binding on the trustees and gives a member of the class of discretionary beneficiaries a right of action for the trustee’s failure to abide by it. In reaching his conclusions, Kirby P referred to the unchallenged findings of the judge at first instance that the trustees had disclosed that in exercising their discretion under the trust they had taken the memorandum of wishes into account. On this view, a wish letter is in relevant aspects quite dissimilar to a revoked will or a will of a living testator but is identical to the valid will of a deceased testator.
If a memorandum of wishes is a document which gives the wife rights to ensure the Trustees exercise their discretion in accordance with it, it is so relevantly similar to the trust deed itself and so similar in a relevant way to an unrevoked will of a deceased testator it would be relevant in these proceedings. One would expect to discern from it, if it is disclosed, whether the Trustees are likely to continue to make distributions to the wife before final distribution, whether there are likely to be funds available for distribution on its winding up and whether some of these will pass to the wife.
More conservative members of the Court of Appeal in Hartigan, Mahoney JA and Sheller JA had little doubt that, in the circumstances in which they were considering the issue, the applicant did not have a right of access to the memorandum of wishes because it was confidential. Both, nevertheless, accepted that certain circumstances, the phrase “countervailing circumstances” was used by Sheller JA, would call for disclosure. Sheller JA went on to say, at p.447, “such a circumstance may spring from the nature of the document itself, as, for example, the documents of title of the trust, from some overriding public interest.” He concluded that, in this instance, any public interest in favour of revelation did not override the confidentiality about his wishes that Mr Read Snr reposed in the Trustees through Mr MR. Mahoney JA dealt with disclosure despite the intention of confidentiality inherent in the existence of the memorandum of wishes, saying at p.436:
“In deciding questions of disclosure, it is important in my opinion to have regard to the essential nature of such discretionary trusts. Such a trust is not a more commercial document in which the public may have an interest. It is a private transaction, a disposition of the settlor of his own property, ordinarily voluntarily, in the manner which he is entitled to choose. Special cases apart, it is proper that his wishes and his privacy be respected.”
The underlining is mine to emphasise his Honour’s recognition that these are exceptions to maintenance of confidentiality.
Nevertheless, Mahoney JA’s view appears to be the high point of support for the Trustee’s submission that because the husband does not know what is in the wish letter he cannot show it to be sufficiently relevant to overcome maintenance of its confidential character. His Honour stated his view of the relevant law with these words:
“A beneficiary may not, by alleging merely that a document contains a settlor’s wishes, seek discovery to ascertain whether the document contains wishes which should not be taken into account. A beneficiary may support a case by discovery but may not use the process to ascertain whether a case exists”.
This does not help the wife here. His Honour asserts that a subpoena can be used to discover a written statement of wishes if it can be shown to be relevant before its actual contents are disclosed. His Honour, by implication, has found that confidentiality is not absolute even in the absence of other evidence of breach of trust.
One must appreciate that s 79 proceedings have a character which is different from State Supreme Court proceedings. The applicant in Hartigan was seeking to see the wish letter so he could, in the course of litigation against the Trustees for failure to do their duty, determine whether or not the Trustees had exercised their discretion in accordance with the wishes expressed in the letter after the Trustees had informed him that, in doing so, they had had regard to the letter in deciding what to do. His stance was that the Trustees were not entitled to rely on the letter at all because it was not a trust document and did not bind them in any manner. In referring to it or relying on it, he claimed they were in beach of their duty to exercise their discretion independently. Thus the applicant had to prove his case on balance or suffer its dismissal.
In s 79 proceedings although the onus is on a party to prove the s 75(2) factors that party relies on, the Court is not simply left to dismiss the party’s case if it is unproven in whole or in part. The Court continues, because of s 79(4)(e), to have the duty to take the matters listed in s75(2) into account, “so far as they are relevant.” As s 79(4) says “the Court shall take [them] into account” and, pursuant to s 79(2), “shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”. Thus, it must be that the Court has a duty which goes beyond the cases presented by the adversarial parties to reach a decision which is a proper exercise of discretion in the circumstances. Both parties are obliged to disclose their financial circumstances. Here, the wife as well as the husband really has the duty to seek to prove what she is likely to receive from the trust in future. Whereas the Trustees were parties in the Supreme Court and as such were entitled to argue the issue of relevance, in the Family Court they are not parties in circumstances where both parties; i.e. the husband and wife, could not avoid the fact that the likely distributions to the wife from the trust is an issue so evidence which might reasonably tend to establish this must be regarded as relevant.
A case exists on this basis for seeing the memorandum of wishes because it has influenced the Trustees in the past and is likely to show to what degree it has done so. It is likely to assist the Court to ascertain whether it is likely to do so in future and what, if it is likely to, is the likelihood that the wife will receive distributions of income and/or capital and, if she is, when she will most probably receive them. It is not a case of ascertaining whether a case exists; it is a case where one of the parties; the husband or the wife, will be able to use it to support his or her case. Even if it does not allow the Court to find that the Trustees are likely to follow it or to some degree will be influenced by it, it is likely to support the wife’s case that the possibility of receipt of distributions is uncertain and should be given less weight.
Sheller JA also found that confidentiality is not absolute. He did not consider the issue of overriding confidentiality from the angle of ability to prove relevance without knowing the contents of the memorandum of wishes and, therefore, the difficulty in demonstrating its relevance which results from that lack of knowledge.
Recently Mr. Justice Briggs in the England & Wales High Court (Chancery Division) in Breakspear & Ors v Ackland & Anor, a decision which has not been reported in the traditional reports but which can be found at [2008] EWHC 220 (Ch), comprehensively considered the law of England on the issue of disclosure of wish letters in the context of discretionary trusts. In doing so, his Honour analysed each judgment in Hartigan. He made a number of points which, to me, seem important in reaching the decision I must make. Very significantly, he pointed out that each member of the Court of Appeal in Hartigan determined the orders he would make on a different basis to both other Judges. He said Mahoney JA simply held that the applicant’s claim to disclosure could only succeed if he had a proprietary right to the document and therefore to disclosure of it and that proper administration of a discretionary property trust involves confidence and confidentiality that had been reposed by the instigator of the trust and that without these being maintained the purpose of the trust could be defeated. He held that the applicant had no property in the document. Sheller JA, he said, relied on ReLondonderry’s Settlement [1965] Ch 918 to agree that trustees need to preserve confidentiality in the manner in which they made discretionary decisions on the disposition of trust property.
Briggs J expressed no doubt that wish letters are not documents which are enveloped in that principle. His Honour then quoted from p 445 of Sheller JA’s judgment. The quoted extract is critical in determining the relevant effect of the decision in Hartigan on the matters I must determine. The quoted part with my underlining for emphasis is:
“With respect to the conclusions in Re Londonderry’s Settlement I think material upon which reasons were or might have been based cannot generally be withheld, unless it reveals the reasons themselves or the reasoning process. In Jacob’s Law of Torts in Australia 5th ed (1986) par 1716 at 393, referring to the Londonderry’s Settlement case the learned authors say:
“Nevertheless, this case is clear authority that beneficiaries have no right to see documents private to the trustees which may evidence the reasons why the trustees have made their decisions”
This statement, in my opinion, accurately describes the nature of documents access to which by beneficiaries are denied.
It is into this class that the appellants seek to press Sir Norman Rydge’s memorandum. By contrast it should be observed that there could be no debate that the trustees are bound to disclose the deed of trust, the trust accounts and as Harman LJ acknowledged (at932), counsel’s advice, ante litem motam, to trustees as to their rights and duties. Such documents are no doubt referred to by trustees from time to time when they come to exercise a discretionary power, but, thought they will influence the trustees, indeed may be decisive, they do not themselves reveal motives, reasons or the process of reasoning. In my opinion that is the decisive distinction. Moreover I do not think that the class of documents to which beneficiaries are denied access should be extended beyond those the non-disclosure of which is necessary to preserve the trustees’ right not to disclose their reasons for exercising discretionary powers and their reasoning processes.
A memorandum in which the settlor indicates his preferences and wishes as to what the trustees should do does not obviously fall within the general category of documents which the English Court of Appeal said need not be disclosed. Because of the nature of the trust, which imposes on the trustees a duty to exercise their own discretion, I do not think Sir Norman Rydge’s memorandum evidences the reasons why the trustees have made their decisions any more than the deed itself does. It stands in contrast to minutes and agenda papers of trustees’ meetings or communications between them”.
Thus, Sheller JA held that there is a distinction between disclosure of private documents of trustees which actually disclose their reasons for exercising their discretion and documents which might influence trustees in doing so, do not reveal their motives, reasons, or their processes of reasoning even though these documents may have had a decisive influence on their administration of the trust. Briggs J summarised the reasons for Sheller JA’s refusal to order disclosure at paragraph 28. of his judgment where he said:
“28. Nevertheless, Sheller JA refused disclosure, on the simple ground that Sir Norman Rydge had by implication imposed on the trustees an obligation to keep his memorandum of wishes confidential from the beneficiaries, by which the trustees were bound in the absence of any sufficient countervailing circumstances, see pages 446G to 447B.”
With great respect to Briggs J, this is a correct analysis of the more relevant of Sheller JA’s reasons to the situation I have to consider. They recognise that, in each instance, when disclosure of a memorandum of wishes which is intended to be confidential to the beneficiaries is sought, the circumstances will determine whether it should be disclosed. I have highlighted this by underlining what I regard as pivotal to the successful reliance by the Trustees on confidentiality.
Briggs J’s analysis of the dissenting reason in Hartigan by the President of the Court of Appeal is stated economically in paragraphs 30. and 31. of Briggs J’s judgement, which should be reproduced. They are:
30. Therefore, Kirby P’s reasoning preferred wholly to discard Re Londonderry, together with cases such as Re Beloved Wilkes’s Charity which preceded and underpinned it. In his view, those cases were the product of an outdated benevolent paternalism, whereas:
“Australian society accepts a generally greater level of accountability than has until now, been accepted as the law of England”
In his view:
“Access should not be limited to documents in which a proprietary right may be established. Such rights may be sufficient: but they are not necessary to a right of access which the courts will enforce to uphold the cestui que trusts entitlement to a reasonable assurance of the manifest integrity of the administration of the trust by the trustees”
31. Kirby P was prepared to acknowledge that an express imposition by the settlor of an obligation of confidence in relation to a wish letter might prevail. Finally in his view once trustees state that they have taken account of a wish letter in making their decision, they thereby put their reasoning sufficiently in to play for any principle which might have otherwise entitled them to resist disclosure to be applied.
I am inclined to agree with Justice Kirby’s comment on benevolent paternalism. More importantly, it follows that on the issue of disclosure of a confidential wish letter held by trustees, Kirby P. and Sheller JA clearly recognise that circumstances will determine whether or not there should be disclosure. Mahoney JA also accepts that this must be the situation. Although Sheller JA refused disclosure, the circumstances were different to those here.
Briggs J concluded that he should not follow the basis up on which Mahoney JA refused disclosure ie: proprietary right, or that on which Kirby P. would have allowed it (see paragraphs 52 to 57 inclusive of Breakspear & Ors Ackland & Anor). His Honour decided, in this instance, to uphold confidentiality. His decision was based on the facts of the individual case. Analysis of that part of it is of no assistance here.
Mr Justice Briggs ultimately held that he was bound by Re Londonderry’s Settlement, the principles of which, he held, remain the law of England. At paragraphs 54, 55, 56 and 58 of his judgement he said:
54. At the heart of the Londonderry principle is the unanimous conclusion (most clearly expressed by Danckwerts LJ) that it is in the interests of beneficiaries of family discretionary trusts, and advantageous to the due administration of such trusts, that the exercise by trustees of their dispositive discretionary powers be regarded, from start to finish, as an essentially confidential process. It is the interest of the beneficiaries because it enables the trustees to make discreet but thorough enquiries as to their competing claims for consideration for benefit without fear or risk that those inquires will come to the beneficiaries’ knowledge. They may include, for example, inquiries as to the existence of some life-threatening illness of which it is appropriate that the beneficiary in question be kept ignorant. Such confidentiality serves the due administration of family trusts both because it tends to reduce the scope for litigation about the rationality of the exercise by trustees of their discretions, and because it is likely to encourage suitable trustees to accept office, undeterred by a perception that their discretionary deliberations will be subject to scrutiny by disappointed or hostile beneficiaries, and to potentially expensive litigation in the courts.
55. I recognise the force of the contrary proposition, best enunciated by the editors of Underhill, that the conferral of a general confidentiality upon the exercise by trustees of their discretionary powers may in particular cases reduce the practical extent to which they can be held to account. Trustees undoubtedly are accountable for the exercise of those powers, but it seems to me quite wrong to suppose that the courts have been mindless of the existence of that core principle of accountability, during the period of more that 150 years when the law has been that it is better for confidentiality to be afforded. While Kirby P and those who sympathise with his views may be right in recognising that, in society generally, the principle of fiduciary accountability has gained ground in recent years, it seems to me that this is better described as a process whereby the strict principles whereby a trustee has always been accountable have spread to other areas of society, where the concept of fiduciary obligations by those who hold property or exercise power or authority on behalf of others, or over their affairs, has come to be more generally recognised.
56. Nor can I see any persuasive basis for thinking that the reasoning which led to English Courts to think it appropriate in the interests of beneficiaries and in the administration of trusts, to confer confidentiality on the exercise by family trustees of their discretionary powers has ceased to hold good. It is not obvious that the potentially disastrous consequences of a resort to civil litigation about the administration of family trust property, in terms of the expenditure of time and cost, are much less of a potential evil than they were in the 19th Century. Nor is there any less need today than there always has been to avoid deterring suitable family trustees from accepting an arduous unpaid office. Of course there is a risk that the conferral of such confidentiality may enable unworthy trustees to use it as a shield for the concealment of their culpable inadequacies, but this risk cannot have been ignored in the 19th Century, and now that it is recognised that the general principal of confidentiality is subject to being overridden as a matter of discretion by the court, it may fairly be supposed that the risk has if anything become more rather than less manageable.
…
58. I turn therefore to the question whether, and if so in what way, the Londonderry principle applies to wish letters. In that context I am content to limit myself to wish letters arising in the context of family discretionary trusts, rather than employee trusts, pension trusts or other business trusts, leaving for another occasion the manner in which the Londonderry principle is applicable to them. The defining characteristic of a wish letter is that it contains material which the settlor desires that the trustees should take into account when exercising their (usually dispositive) discretionary powers. It is therefore brought into existence for the sole purpose of serving and facilitating an inherently confidential process. It seems to me axiomatic that a document brought into existence for the sole or predominant purpose of being used in furtherance of an inherently confidential process is itself properly to be regarded as confidential, to substantially the same extent and effect as the process which it is intended to serve.
I have underlined the references to exceptions to and limitations on confidentiality which his Honour accepted. One is driven to comment that in the case of the MR Settlement and many substantial trusts, these days family members are often not the trustees. Businesses specialising in administration of trusts which charge for their troubles usually are. Family trustees can employ firms of advisors and administrators to do the work involved in administration. The need to avoid discouraging trustees from acting as such has largely evaporated.
The sentiment expressed in the last sentence of this extract from His Honour’s judgment was, earlier in it, emphasised as being particularly apposite to divorce proceedings. At paragraph 51 he said: “the evaluation of the beneficiaries’ prospects arises in divorce proceedings to which he or she is a party, which seems to me to be an aspect of the Courts powers to require disclosure for the purpose of resolving issues in litigation” is a “special case”, being an instance “where the beneficiary’s future prospects may be relevant to an issue in respect of which he or she is a party to litigation”. This “special case” exists in the proceedings I am determining.
I conclude that there is no real distinction between my obligations under White Tulloch v White and the general law on disclosure of a wish letter. Although trustees should primarily regard themselves as having a duty to withhold disclosure of a confidential memorandum of wishes, and I hold that the specific memorandum is inferentially to be regarded by the Trustees and Court as confidential, the Trustees and Court ought determine whether countervailing circumstances, including the likely relevance of the wishes of the person at whose request the trust was created, warrants disclosure.
Here, there are distinctions from the decided cases. One distinction has not so far been referred to. It is that the person seeking disclosure is not a beneficiary or an expectant beneficiary but is, from the point of view of the creators of the trust and the Trustees, a stranger. As the effect of disclosure to the husband must be disclosure to the wife because fairness in the property proceedings would not permit the husband to know the express wishes of Mr Read Snr without the wife also knowing them, I regard this distinction as more apparent than real and of no account. But the distinction in the type and nature of the proceedings is critical; those I am dealing with being Family Law proceedings for property settlement by which the Trustees and the trust are relatively unaffected compared with proceedings in which the Trustees are the defendants. As I am satisfied the principle established in White & Tulloch v White applies to wish letters. I shall apply those principles here, knowing the right to confidentiality is a qualified one.
I regard the wife’s future financial prospects as a matter of great importance in the s 79 proceedings between the parties. The Trustees have already conceded they have been influenced by the wishes of Mr Read Snr. One should be able to tell, on balance, from the memorandum of wishes whether the pattern which has been established of distribution to the wife is or is not in accord with those wishes and to what degree. The memorandum is likely to point to the wife’s future; whether there is a certain pattern or lack of pattern of conformity in distributions to the wife with those wishes; therefore, whether that pattern is likely to continue with a relatively predictable result.
The issue of relevance in these proceedings is only partly determined by what can be ascertained about the future from a reading of the wish letter. The admissibility of the wish letter is in part, but an important part, also to be determined by the amount of money involved in the trust. One cannot overlook the range of future possibilities of distribution to the wife. These could be from nothing or an insignificant amount to extremely large sums. In theory, she could get nothing after the s 79 proceedings are decided or she could get more than $600 million immediately after the s 79 judgement is delivered. It is essential to justice for the Court to have as much information as it can be given about the wife’s future prospects under the trust because of the wide variance in possibilities created by the exceptional funds available.
The Trustees’ argument that because the memorandum of wishes does not bind the trustees it can have no relevance must be rejected. Although the wife may have only a contingent entitlement and is no more than a member of a class of beneficiaries, the memorandum of wishes has sufficient likelihood to enlighten the Court about her future economic circumstances to be highly relevant to the central issue in s 79 proceedings. A wish letter will provide necessary information. It is relevant whatever the information might reasonably be.
In reaching this conclusion I am not suggesting that the Trustees should have to disclose their reasons or their thinking in administering the trust. The Court is likely to be, by the disclosure of the memorandum of wishes, in a better position to predict what the Trustees are likely to do in future because they have conceded in Hartigan that they have been influenced by it. I should and shall not set aside paragraphs 2 and 3 of each subpoena and shall grant leave to the husband and wife directly and through their lawyers to inspect the documents produced under them provided that both provide the Court and the Trustees with a written undertaking to the Court in appropriate form that they will not disclose the contents of those documents to any other person except with leave of the Court.
The orders of the Court should be:
1.The application of the trustees to set aside paragraphs 2 and 3 of each of the subpoenas issued on behalf of the husband to the proper officer, Z Pty Limited and to the proper officer M Pty Limited and filed and 23 November 2009 is dismissed.
2.Leave is granted to the husband to personally and thorough his legal advisors inspect the documents produced to the Court in answer to the subpoenas referred to in Order 1 after he has filed and served on the wife, Z Pty Limited and M Pty Limited a written undertaking to the Court in proper form that he will not disclose any of the contents of or effect of the documents produced in answer to the subpoenas referred to in Order 1 to any person or persons other than his legal advisers or as is reasonably necessary for the conduct of the proceedings herein.
3.Leave is granted to the wife to personally and through her legal advisors inspect the documents produced to the Court in answer to the subpoenas referred to in Order 1 after she has filed and served on the husband, Z Pty Limited and M Pty Limited a written undertaking to the Court in proper form that she will not disclose and of the contents of or effect of the documents produced in answer to the subpoenas referred to in Order 1 to any person or persons other than her legal advisors or as is reasonably necessary for the conduct of the proceedings herein.
4.Costs are reserved.
I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cohen.
Associate:
Date: 9 June 2010
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