Schweitzer & Schweitzer
[2012] FamCA 445
•10 May 2012
FAMILY COURT OF AUSTRALIA
| SCHWEITZER & SCHWEITZER | [2012] FamCA 445 |
| FAMILY LAW – PROPERTY – Wife sought disclosure by husband of financial documents of two trusts and minutes or resolutions of the corporate trustees of those two trusts relating to trust distributions – Husband a director of the two corporate trustees but not the sole director – Husband not a shareholder of either corporate trustee – Husband a discretionary beneficiary of both trusts – Husband has fiduciary obligations in relation to holding and use of trust documents and corporate trustee documents – Question whether documents sought are in the possession of or under the control of husband – Application for disclosure by husband dismissed |
FAMILY LAW – PROPERTY – DISCLOSURE – COMPANY DIRECTOR – Whether on the particular facts of the case company documents are in the possession of or under the control of a husband who is a director but not the sole director
Corporations Act 2001 (Cth) s 290
Family Law Act 1975 (Cth) s 79
| Family Law Rules 2004 Rule 13.07, 13.08, 13.09, 13.10, 13.11, 13.12, 13.13 |
| Barro & Barro (No 2) (1983) FLC 91-317 B v B (Matrimonial Proceedings: Discovery) [1979] 1 All ER 801 Edman v Ross (1922) 22 SR (NSW) 351 Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627 Mills & Mills (1938) 60 CLR 150 Rochfort v Trade Practices Commission (1982) 153 CLR 134 |
| APPLICANT: | Ms Schweitzer |
| RESPONDENT: | Mr Schweitzer |
| FILE NUMBER: | BRC | 2383 | of | 2012 |
| DATE DELIVERED: | 10 May 2012 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | O’Reilly J |
| HEARING DATE: | 9 May 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Hogan |
| SOLICITOR FOR THE APPLICANT: | Ms Bint Hopgood Ganim |
| COUNSEL FOR THE RESPONDENT: | Mr S J Williams |
| SOLICITOR FOR THE RESPONDENT: | Barry.Nilsson.Lawyers |
Orders
IT IS ORDERED BY CONSENT
In the terms of the minute of orders Annexure A.
AND IT IS FURTHER ORDERED
The original minute of orders signed by the parties be placed and kept on the Court file.
AND IT IS FURTHER ORDERED
The wife’s application for disclosure by the husband of:
a.copies of financial statements and tax returns for the Schweitzer Investment Trust and the Schweitzer Family Trust for the last 3 financial years, including balance sheets, profit and loss accounts and depreciation schedules
b.bank statements for the Schweitzer Investment Trust and the Schweitzer Family Trust for the last 2 financial years and
c.copies of minutes or resolutions of the corporate trustees of the Schweitzer Investment Trust and the Schweitzer Family Trust relating to trust distributions for the last 3 financial years
is dismissed.
The costs of both parties of and incidental to the wife’s application against the husband for disclosure are reserved to the trial judge.
AND IT IS FURTHER ORDERED
The case assessment conference scheduled for 9.00am on Wednesday 30 May 2012 be vacated.
The matter be listed before Registrar Stoneham for a trial directions hearing at 3.00pm on Friday 10 August 2012.
ANNEXURE A
UPON THE UNDERTAKING OF THE HUSBAND TO REFRAIN FROM GAMBLING MORE THAN A TOTAL AMOUNT OF $500 PER WEEK (INCLUDING BUT NOT LIMITED TO, ONLINE GAMBLING SUCH AS SPORTSBET, CENTREBET AND BETFAIR, GAMBLING IN CASINOS, GAMBLING ON POKIE MACHINES AND PURCHASING LOTTERY TICKETS FROM GOLDEN CASKET OR ANY OTHER ORGANISATION OR CHARITY
IT IS ORDERED BY CONSENT BY WAY OF INTERIM ORDER
That subject to paragraphs 2(b) and 2(c), the Husband produce to the Wife bank statements for the Schweitzer Superannuation Fund for the past 12 months.
That the Husband will:
a.keep the Wife fully informed in relation to his financial circumstances including but not limited to his trading activities by providing her with the following documents every three months beginning on 1 June 2012:
(i) copies of bank statements for any account, including savings, loan and credit card held in the Husband’s name or jointly with another person and for the following entities and trusts:
1.Mr Schweitzer Holdings Pty Ltd ACN 134 723 256;
2.T Pty Ltd ACN …;
3.B Pty Ltd ACN …;
4.S Trading Trust; and
5.Mr Schweitzer Family Trust,
(Husband’s Entities and Trusts); and
(ii) Share and investment statements held in the Husband’s name or jointly with another person or the names of the Husband’s Entities and Trusts; and
b.Make available to the wife for her inspection, upon request, the original of all documentation disclosed to date and all documents disclosed in the future;
c.Provide to the Wife with bank statements as opposed to internet transactions or transaction reports; and
d.Provide any other reasonable information and disclosure requested by the Wife regarding his financial circumstances.
Within 48 hours of the Husband selling, transferring or disposing of any matrimonial assets having a value greater than $5,000 including those controlled by the Husband’s Entities and Trusts, the Husband provide to the Wife’s solicitor details of the same and any documents relating to such sale, transfer or disposition.
That, until further order, each of the parties be restrained from drawing down on the mortgage secured over the property at … C Street, Suburb R.
The wife shall continue to reside in the property at … C Street, Suburb R, and the Husband and the Wife will each contribute to the rates, taxes and maintenance costs of the property in equal proportions (provided that any expenditure for maintenance is approved in writing by both parties prior to it being expended).
That within 7 days of the date of these orders, the parties jointly instruct Mr Y of J Valuers as the single expert witness to value the former matrimonial home.
That the parties share equally the costs of Mr Mr Y’s fees.
That within 7 days of these orders, the parties jointly instruct D Valuers as a single expert witness to value the parties’ wine collection.
That the parties share equally the costs of such valuation.
That the parties participate in a private mediation before 30 July 2012.
That the parties shall share equally the costs of the mediator’s fees.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Schweitzer & Schweitzer 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 BRISBANE |
FILE NUMBER: BRC 2383 of 2012
| Ms Schweitzer |
Applicant
And
| Mr Schweitzer |
Respondent
REASONS FOR JUDGMENT
EX TEMPORE
The wife by her initiating application filed 21 March 2012 and the husband by his response filed 8 May 2012 each seek a just and equitable division of their property and assets under s 79 of the Family Law Act 1975 (Cth).
The wife seeks also such periodic or lump sum spousal maintenance as may be ordered after taking into account her s 79 property settlement.
The wife presently seeks interim and procedural orders in relation to specific disclosure by the husband which has been the subject of detailed correspondence between the parties’ solicitors.
The parties were able to agree many matters relating to disclosure and procedural matters which will be the subject of a consent order.
The matter for me to determine is in narrow compass, namely that the husband disclose to the wife documents in relation to two trusts namely:
a. copies of financial statements and tax returns for the Schweitzer Investment Trust and the Schweitzer Family Trust for the three most recent financial years, including balance sheets, profit and loss accounts and depreciation schedules
b. bank statements for the Schweitzer Investment Trust and the Schweitzer Family Trust for the past two years and
c. copies of minutes or resolutions of the corporate trustees of the Schweitzer Investment Trust and the Schweitzer Family Trust relating to trust distributions for the last three financial years.
The husband by his Counsel, Mr S J Williams, resists that disclosure on several bases, including relevance to the wife’s claim.
In relation to par c above, initially a point was taken that the reasoning of trustees is not available for disclosure. However, it is plain to me that par c seeks only the minutes or resolutions themselves, and does not seek documents relating to underlying reasoning.
Rule 13.07 of the Family Law Rules 2004 provides:
RULE 13.07 DUTY OF DISCLOSURE - DOCUMENTS
13.07 The duty of disclosure applies to each document that:
(a)is or has been in the possession, or under the control, of the party disclosing the document; and
(b)is relevant to an issue in the case. (emphasis added)
During argument, available on transcript if required, such that I need not set it out, I intimated to Ms Hogan, Counsel for the wife, and to Mr Williams, Counsel for the husband, that for the purposes of the disclosure argument in relation to the two trusts I would proceed on the basis of assuming relevance for the purpose of Rule 13.07(b).
In this context I should make clear that whilst the husband, through his Counsel, did not concede relevance, it seemed to me that for expedition of the argument it should proceed on the basis that relevance be assumed.
The following agreed facts are relevant, which I take from Ms Hogan’s submissions using her paragraph numbers:
8. [A] Pty Ltd is the corporate trustee of the [Schweitzer] Family Trust.
9. The husband is a Director of [A] Pty Ltd.
10. [E] Pty Ltd is the corporate trustee of the [Schweitzer] Investment Trust.
11. The husband is a Director and the Secretary of [E] Pty Ltd.
12. The husband is the primary beneficiary of the [Schweitzer] Investment Trust and a secondary beneficiary of the [Schweitzer] Family Trust.
Further, it is common ground that the husband is one of two directors of E Pty Ltd, the trustee of the Schweitzer Investment Trust, the other director being his father; and one of three directors of A Pty Ltd, the trustee of the Schweitzer Family Trust, the other two directors being his father and his mother.
The following agreed facts are also relevant, which I will take from Mr Williams’ submissions using his paragraph numbers.
9. Each trust referred to is a discretionary trust, of which the Husband falls within a class (not necessarily the same in each trust) of beneficiary.
10. The Appointor of each trust is the Husband’s father.
11. The Husband is a director of the corporate trustee of each trust: [A] Pty Ltd ATF [Schweitzer] Family Trust; [E] Pty Ltd ATF [Schweitzer] Investment Trust.
12. The husband is not a shareholder in either corporate trustee.
Ms Hogan submitted (par 17):
17.It is submitted that the Trust documents requested by the Wife are disclosable by the Husband because:
a. as a director of the corporate Trustees, he is entitled, pursuant to s 290 of the Corporations Act 2001 (Cth) to the financial records of the companies.
b.as a beneficiary of the Trusts, he is entitled to access to the financial documents in order to ascertain whether the Trusts are being properly administered. (emphasis added)
Having heard argument, I am satisfied for the purpose of Rule 13.07(a) that the documents sought by the wife are not and cannot be “in the possession” of nor “under the control” of the husband, in his personal capacity, and are not, on the facts of the case insofar as are established, “in the possession” of nor “under the control” of the husband in his capacity as a director of the corporate entities who are the trustees of the two trusts nor in his capacity as a beneficiary.
In Mills & Mills (1938) 60 CLR 150, Dixon J said at 185:
Directors of a company are fiduciary agents, and a power conferred upon them cannot be exercised in order to obtain some private advantage or for any purpose foreign to the power. It is only one application of the general doctrine expressed by Lord Northington in Aleyn v Belchier.: “No point is better established than that, a person having a power, must execute it bona fide for the end designed, otherwise it is corrupt and void.”… (footnote omitted)
In Edman v Ross (1922) 22 SR (NSW) 351 Street CJ in Equity said at 361:
The right to inspect documents and, if necessary, to take copies of them is essential to the proper performance of a director’s duties, and, though I am not prepared to say that the Court might not restrain him in the exercise of this right if satisfied affirmatively that his intention was to abuse the confidence reposed in him and materially to injure the company, it is true nevertheless, that its exercise is, generally speaking, not a matter of discretion with the Court and that he cannot be called upon to furnish his reasons before being allowed to exercise it. In the absence of clear proof to the contrary the Court must assume that he will exercise it for the benefit of his company. …
In Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627, Lord Diplock (with whom their other Lordships agreed) dealt with the question whether a parent company was in possession of documents of subsidiaries, for the purpose of disclosure obligations: see at 634 (not relevant here). However, at 636-7, his Lordship left open the question whether in respect of “one-man” companies of which “a natural person and/or his nominees” are the sole shareholders and directors (alter ego companies) in effect, documents of the company may be held to be in the possession or power of such persons:
… In particular, I say nothing about one-man companies in which a natural person and/or his nominees are the sole shareholders and directors. It may be that, depending on their own facts, different considerations may apply to these.
It is plain however that in relation to the obligations of a trustee, whether a natural person, or a corporate trustee, a fiduciary relationship exists between the trustee and the beneficiaries of the trust. Further, it is plain that the directors of a corporation, whether or not the corporation be a trustee, stand in a fiduciary relationship with the corporation.
The effect is that, in either case, though there be a right of access to documents by a trustee (whether a natural person or a corporation), and by a director of a corporation (whether or not a trustee), just as trust or corporate knowledge must be used only for the purpose for which it was obtained, so also access to and the use of trust or corporate documents can be exercised only (as the case may be) for trust or corporate purposes.
It is in this sense that s 290(1) of the Corporations Act 2001 (Cth) provides that directors have a right of access to the financial records of a company.
I would refer now to B v B (Matrimonial Proceedings: Discovery) [1979] 1 All ER 801. In that case, at 803-806, Dunn J set out the history of the particular matter before him, and the meaning and effect of “possession, custody or power”, being the words used in RSC Order 24 which he was required to consider.
At 805g-i, Dunn J said:
The person to be considered is therefore the husband, the party to the suit, and the next and vital question in the case is: are these documents which were ordered to be produced documents which are or have been in the possession, custody or power of the husband? For this purpose 'possession' means, the right to the possession of a document. 'Custody' means the actual, physical or corporeal holding of a document regardless of the right to its possession, for example, a holding of a document by a party as servant or agent of the true owner. 'Power' means, an enforceable right to inspect the document or to obtain possession or control of the document from the person who ordinarily has it in fact. The requirements of the rules are disjunctive in their operation, so far as possession, custody and power are concerned. (emphasis added)
Dunn J then referred to the distinction in the English Rules before 1964 which had provided for documents to be “discovered”, and then separately, “produced” for inspection and copying; but said that since 1964:
…under the present rules the obligation to give inspection extends prima facie to all documents to which the obligation to give discovery extends…
subject to a discretion in the Court to refuse inspection: see at 806b-d.
Dunn J then said (at 807):
How do these general principles apply to the director of a company in relation to company documents, that is to documents which are in the possession of the company in the sense that the company has the sole legal right to their possession? If they are or have been in the custody or physical possession of the director, even if he only held them or holds them as a servant or agent of the company, or in his capacity as an officer of the company, then they must be disclosed. Whether such documents are or have been in his custody is a question of fact in each case. It is a matter for the discretion of the Court whether they should be produced: (footnotes omitted) (emphasis added)
Later in the same passage Dunn J said:
It is plain from those cases [referred to earlier at 807] that before 1964 it was not the practice of the court to order production of such documents if the board of directors objected to its production on affidavit, but the court must be satisfied that the objection was not contrived. But what of relevant company documents which are not and never have been in the custody of the director who is a party to the proceedings to which the company is not a party? Are such documents within the power of the director? Section 12(1) of the Companies Act 1976 provides that 'Every company shall cause accounting records to be kept … ', and sub-s (6) provides that such records 'shall be kept at the registered office of the company or at such other place as the directors of the company think fit and shall at all times be open to inspection by the officers of the company'. But the right to inspect, under the provisions of that section, is a right vested in a director in his capacity as a director or officer of the company; he is in a fiduciary relationship with the company; he owes duties to the company and to its shareholders. Without the consent of the company he has no right to inspect documents, much less to take copies of them or remove them from the premises of the company for his own purposes unconnected with the business of the company. Because, in his capacity as a director, he has the right to inspect the company documents, it does not follow that in his personal capacity he has an enforceable right to inspect or to obtain possession or control of them so that the documents can be said to be in his power. It is a question of fact in each case whether or not a director has such an enforceable right; much will depend on the share structure of the company. In cases of a one man company, where the director owns all or substantially all the shares and any minority shareholders are not adverse to him, then the inference may be drawn that the company, although a separate legal entity, does not control him but he controls the company in such manner as to make it his other person or alter ego. In such a case, where the director controls the company and nominates the other directors, all the documents of the company are within his power in the sense that in truth and in fact he is able to obtain control of them. (underscore and emphasis added)
Although dealing in that passage with “power”, Dunn J, relevantly, referred to the right to “possession or control” as constituting “power”: see again the passage set out from p 805g-i in the same case.
It is clear that in B v B Dunn J was concerned to distinguish the obligation to disclose, and the obligation to produce, for inspection and copying, both in relation to the pre and post 1964 English Rules.
Barro & Barro (No 2) (1983) FLC 91-317 is regarded as the leading authority in this Court. The Full Court there was referred to B v B (see at 71,156 L col), and said at 78,159:
Where documents are or have been in the ''possession custody or power'' of a party, even though he holds or held them as a servant or agent of a company or in his capacity as an officer of a company, they must be disclosed if they are relevant. Where they are still in his control they are also required to be produced unless the Court as a matter of discretion upholds his objection against production. Where the documents have been but are no longer in his actual possession but are in the possession of a company with which he is connected then the first question to determine is whether those documents are in his power. That is, whether, aside from his right to possession of them as an officer of the company, he is entitled to possession of the documents from time to time as against the company. This depends upon the nature of the company structure, the degree of control exercised by the particular director etc.; see generally B. v. B. (supra) at pp. 807-809, 811; Rochfort v. Trade Practices Commission (supra) esp. at pp. 32-33 (Gibbs C.J.), pp. 34-35 (Mason J.) and p. 36 (Murphy J.).
In B. v. B. (supra) at p. 807 Dunn J. says:
`` How do these general principles apply to the director of a company in relation to company documents, that is to documents which are in the possession of the company in the sense that the company has the sole legal right to their possession? If they are or have been in the custody or physical possession of the director, even if he only held them or holds them as servant or agent of the company, or in his capacity as an officer of the company, then they must be disclosed. Whether such documents are or have been in his custody is a question of fact in each case. It is a matter for the discretion of the court whether they should be produced: see Skoye v. Bailey (1971) 1 W.W.R. 144 and Williams v. Ingram (1900) 16 T.L.R. 451.''
It would seem that in the exercise of that discretion the Court will need to have regard to all of the circumstances and will balance the relevance and importance of the documents and the hardship likely to be caused to the wife by non-production against any prejudice that the husband or third party is likely to be caused by their production. (emphasis added)
It is plain that in this passage the Full Court’s reference to “actual possession” was used in the sense of “custody”, that is, “physical or corporeal holding”, in particular because of their Honours’ specific reference to B v B; and the plain distinction made in that case between “legal right to possession”, and “custody or physical possession”.
Rochfort v Trade Practices Commission (1982) 153 CLR 134 (cited by their Honours in Barro (No 2)), was a decision concerning a subpoena duces tecum. In that case, their Honours in the High Court were concerned with the obligation of a person in the physical possession of documents (ie, “custody” or “physical custody”) of an unincorporated association to obey a subpoena, because it is a court order: see at 139.4 per Gibbs J; 143.6, 145.2-.8 and 146.2-.4 per Mason J; 148.8 per Murphy J; 151.8 per Wilson J.
Murphy J distinguished however between the obligation of a person under a subpoena to “bring [documents] to court” pursuant to the subpoena, if that person had physical custody of the documents sought, and the right to object to production on the ground that the person subpoenaed did not have (relevantly) possession of or power over the documents, such that his Honour said, at 149:
… Any person summoned to produce documents who has physical custody of them must bring them to court. The person may object to producing the documents (or any of them) on the ground that he has no possession of or power over the documents but that another person (or persons) has possession or power and that the summons should be directed to that person. The court will not order the person summoned to produce the documents if it is satisfied that he has no possession or power and that the person who has possession or power can be summoned to produce them. … (emphasis added)
Barro (No 2) dealt with discovery, not a subpoena.
Barro (No 2) was however decided in 1983, when discovery obligations were the subject of the Family Law Regulations, regs 83-88, which provided that the discovery process involved the obligation to “specify” documents in a party’s “possession, custody or power” relating to any matter in question in the proceedings, but then the right to object to producing the documents for inspection including on grounds that the documents were not in the party’s “sole” possession: see at 78,157-8, esp 78,158, R col:
Clearly the regulations are not as felicitously expressed as they might be but their general effect is clear. That is, a notice of discovery may be served and the other party is required to discover on oath relevant documents which are or have been in that person's ''possession, custody or power'' . The former party may then give a notice requiring inspection which notice must be complied with within a specified time unless either in the original affidavit or a subsequent document he objects to production on a specified ground. In that latter event the Court may rule upon that objection and in the appropriate case make an order for inspection.
However, what is clear is that Family Law Regulations adopt what might be described here as the post-1964 English position. Accordingly the cases to which counsel for the husband referred us do not have application. Relevantly here that means that prima facie a party is not entitled to object to discover or produce a document only on the ground that it is not in his sole possession. Where such is the case that person may in his affidavit of discovery object to production on grounds relevant to the exercise of discretion by the Court. (emphasis added)
It was this circumstance, in my view, which led their Honours in Barro (No 2) to the conclusions at 78,159, already set out, involving the necessity to discover documents in a person’s physical custody, but with the right to object to their production, the matter of whether or not there be production then being in the discretion of the Court, according to the then Family Law Regulations, regs 83‑88.
Their Honours at 78,156, R col, distinguished the procedure for discovery and production from the procedure relating to subponenae duces tecum (citing Rochfort), but importantly, went on to say in relation to discovery and production:
The submission of counsel for the husband is that a party is bound to discover all documents which are or have been in his physical possession or power whether solely or jointly with or as agent for another but that he was not obligated to produce for inspection any such document which is not in his sole possession or power but which is only in his possession or power as an agent of or jointly with another. He submitted that this was the well established rule in England prior to changes to rules of court in England in 1964 and it is still applicable in Australia.
However, it seems to us that it is necessary to look at the rules of the particular court to determine this issue. That is, the issue is governed by the terms of the relevant rules of the court in question. (underscore and emphasis added)
The Family Law Rules 2004 provide, in addition to Rule 13.07, already set out, the following:
RULE 13.08 INSPECTION OF DOCUMENTS
13.08(1) A party may, by written notice, require another party to provide a copy of, or produce for inspection, a document referred to:
(a) in a document filed or served by a party on another party or independent children's lawyer; or
(b) in correspondence prepared and sent by or to another party or independent children's lawyer.
13.08(2) A party required to provide a copy of a document must provide the copy within 21 days after receiving the written notice.
RULE 13.09 PRODUCTION OF ORIGINAL DOCUMENTS
13.09 A party may, by written notice, require another party to produce for inspection an original document if the document is a document that must be produced under the duty of disclosure.
RULE 13.10 DISCLOSURE BY INSPECTION OF DOCUMENTS
13.10(1) If a party is required to produce a document for inspection under rule 13.08 or 13.09, the party must:
(a) notify, in writing, the party requesting the document of a convenient place and time to inspect the document;
(b)produce the document for inspection at that place and time; and
(c) allow copies of the document to be made, at the expense of the party requesting it.
13.10(2) The time fixed under paragraph (1) (a) must be within 21 days after the party receives a written notice under rule 13.08 or 13.09 or as otherwise agreed.
RULE 13.11 COSTS FOR INSPECTION
13.11 A party who fails to inspect a document under a notice given under rule 13.08 or 13.09 or paragraph 13.20(3)(a) may not later do so unless the party tenders an amount for the reasonable costs of providing another opportunity for inspection.
RULE 13.12 DOCUMENTS THAT NEED NOT BE PRODUCED
13.12 Subject to rule 15.55, a party must disclose, but need not produce to the party requesting it:
(a)a document for which there is a claim for privilege from disclosure; or
(b) a document a copy of which is already disclosed, if the copy contains no change, obliteration or other mark or feature that is likely to affect the outcome of the case.
RULE 13.13OBJECTION TO PRODUCTION
13.13(1)This rule applies if:
(a)a party claims:
(i)privilege from production of a document; or
(ii)that the party is unable to produce a document; and
(b)another party, by written notice, challenges the claim.
13.13(2) The party making the claim must, within 7 days after the other party challenges the claim, file an affidavit setting out details of the claim.
Thus, under the Family Law Rules 2004, once a document is “disclosed” under Rule 13.07, the disclosing party (presuming that, for the purpose of Rule 13.08(1), a filed or served affidavit of documents or a filed or served list of documents is within Rule 13.08(1)(a)), must, by Rule 13.10:
· produce it for inspection and
· allow copies to be made and taken.
Further, the only grounds of objection are (Rules 13.12, 13.3):
· privilege
· that a true copy of a document, with no relevant alterations, already has been disclosed or
· a document is unable to be produced (which would appear to relate to physical inability).
Under the Family Law Rules 2004, the duty of disclosure applies to “all cases”. The process of disclosure however, by Rules 13.08, 13.10, 13.12 and 13.13, is that all documents disclosed must be produced for inspection and copying, unless one of the grounds identified obtains. The process of disclosure thus is that once there is disclosure there is mandatory production for inspection and the provision of copies of the disclosed documents, unless the specific grounds for objection obtain (there being no residual discretion, unlike in the Family Law Regulations, regs 83-88, under consideration in Barro (No 2)).
Readily, it will be seen, Rule 13.07 does not include a duty of disclosure by a party with “custody” of a document, meaning, as Dunn J said in B v B, at 805:
… ‘Custody’ means the actual, physical or corporeal holding of a document regardless of the right to its possession, for example, a holding of a document by a party as servant or agent of the true owner. … (emphasis added)
See also Murphy J in Rochfort at 149, as to “physical custody” already set out.
Thus, by way of explanation of Barro (No 2), when the Family Law Regulations included an obligation to disclose documents in the “possession, custody or power” of a party, it made sense for the Full Court to rule as it did, because a person could object to produce documents on the basis that they may be in his “custody” but not his possession or power.
However, the absence in Rule 13.07(a) of “custody” is consistent with the absence of ability to object to production or copying on the ground that the person has “no possession of or power over the documents” but that “another person” has “possession or power”: see again Murphy J in Rochfort at 149.
This, accordingly, throws further light on the meaning of “possession” within the meaning of Rule 13.07(a), that it means not mere physical possession (custody) but “possession” within the accepted meaning of “the legal right to possession”: see in B v B (above), per Dunn J at 805; 807.
Similarly, “control” within the meaning of Rule 13.07(a) has its accepted meaning as already set out.
The fiduciary obligations which obtain in relation to directors of corporations and trustees (whether natural persons, or corporations) has effect that there is no right to “possession”, or “control”, in any personal capacity, but, as emphasised in Mills (above), Edman v Ross (above), Lonhro (above) and s 290(1) Corporations Act, there is only a right of access to documents, strictly for the purposes of the corporation or the trust.
I turn now to the another submission by Ms Hogan, who relied on the following paragraphs in the wife’s affidavit 21 March 2012:
62.Throughout the course of discovery [the husband] has refused to provide me with any documentation relating to his interest in his family’s business of which he is a director.
63.Despite [the husband] being a beneficiary of the [Schweitzer] Family Trust and the [Schweitzer] Investment Trust, [the husband] refuses to disclose tax returns, bank statements and financial statements for the [Schweitzer] Family Trust or the [Schweitzer] Investment Trust. … (emphasis added)
The husband said in response, in his affidavit filed 8 May 2012:
65.In paragraph 62 and 63 of [the wife’s] Affidavit she states that I have refused to provide her with disclosure in relation to the [Schweitzer] Family Trust and the [Schweitzer] Investment Trust. My father is the appointer/principal of both entities. I have spoken to my father about the disclosure that [the wife] seeks from the Trusts and he has advised me in words to the effect:
“These are assets of your mother and me. I object to becoming involved in your matrimonial proceedings and providing the documents that have been requested.”
The trusts are discretionary trusts. As is understood, thus, a beneficiary has no interest in the corpus, but only the right to require due administration of the trusts, and (cf Ms Hogan’s submissions, par 17, above), is entitled to access to the financial documents of the trustees only for the purpose of ascertaining that there is due administration.
I am mindful that the wife’s same affidavit filed 21 March 2012, pars 19-34, alleges gambling by the husband of significant sums of money: “on some days there were multiple $1 million bets” (par 26); which she alleges could not be possible on the husband’s disclosed income in his 2011 tax return (par 27); suggesting that in truth the husband may be in control of the trusts.
However, these are allegations of fact not capable of being the subject of findings in an interlocutory application. These are matters for the trial when, and if, disclosure is sought by the proper entities, that is, the two corporate trustees, by way of non party disclosure, unless they are joined as necessary parties, under the joinder rules, with effect that there would then be inter parties disclosure by those entities.
Ms Hogan’s submissions included (par 14):
14.The Husband has failed to provide any documents, stating that:
a.as he is not a shareholder of either of the corporate Trustees, he is not in a position to provide such documents; and
b.because he is not a shareholder of either of the corporate Trustees, the entities do not form part of ‘property of the parties or either of them’ and, consequently, any request for information about the Trusts should be made to the owners of the corporate Trustees.
In my view, legally, it is a correct contention that the disclosure the wife seeks must be directed to the corporate trustees by the proper officer of each.
The husband is one of two directors of one of the entities, and one of three directors of the other entity. He is a shareholder in neither. Objectively, there is no evidence to suggest that either entity is is the husband’s alter ego.
Ms Hogan questioned the veracity of par 65 of the husband’s affidavit filed 8 May 2012, on the basis that it is a recent deposition in the light of a long history of solicitors correspondence, so that I ought not accept it. That however would require a finding of credibility in an interlocutory application, without cross examination, which would be inappropriate.
I would conclude thus that the disclosure the wife seeks is inappropriately sought against the husband, in his capacity as the husband, and inappropriately sought against him in his capacity as a director of the corporate trustees, or as a beneficiary of the discretionary trusts.
Any documents of the corporate trustees to which the husband has access, he has access as a fiduciary such that, relevantly, such documents are not in his possession or under his control. The disclosure sought, thus, could be sought only against the two corporate trustees, either by way of their joinder, for declaratory or other relief, if the wife be so advised, or short of that, for non party disclosure relief.
The Rules of Court, Chapter 6, provide clear guidance as to who should be parties to actions. In particular, if ultimately the wife is to seek relief involving the trusts, it seems to me to be at least prudent, if not necessary, that the corporate trustees be joined.
I will refuse the disclosure relief that the wife seeks.
I have added to these reasons in editing, as on 10 May 2012 expressly I reserved the right to do.
I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of the Honourable Justice O’Reilly delivered on 10 May 2012.
Associate:
Date: 12 June 2012
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