Sully and Sully
[2018] FamCA 786
•2 October 2018
FAMILY COURT OF AUSTRALIA
| SULLY & SULLY | [2018] FamCA 786 |
| FAMILY LAW – PRACTICE AND PROCEDURE – Subpoena – where a party issues wide-ranging subpoenae to various banks without serving interested persons – Discussion about the difficulty in determining who is an interested person – Discussion about the need for lawyers to communicate with one another rather than just issue subpoenae. |
| Corporations Act 2001 (Cth) Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) |
| Cahill & Cahill & Anor [2013] FamCA 176 Emhill Pty Ltd v Bonsoc Pty Ltd [2004] VSC 322 |
| APPLICANT: | Mr Sully |
| RESPONDENT: | Ms Sully |
| FILE NUMBER: | MLC | 2232 | of | 2016 |
| DATE DELIVERED: | 2 October 2018 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 20 September 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Sweeney |
| SOLICITOR FOR THE APPLICANT: | Lander & Rogers |
| COUNSEL FOR THE RESPONDENT: | Mr Nehmy |
| SOLICITOR FOR THE RESPONDENT: | Taussig Cherrie Fildes |
Orders
That the application in a case filed 17 September 2018 and the response filed 19 September 2018 are adjourned to 10:00am on 12 October 2018 for further determination.
That the injunction as to the release of materials produced under subpoenae continue until further order.
That the costs of all parties of these discrete proceedings are reserved to the return date.
That to the extent the parties resolve their dispute, they have leave to approach the chambers of the Honourable Justice Cronin to make consent orders including any orders as to how any costs dispute should be determined.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Sully & Sully has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 2232 of 2016
| Mr Sully |
Applicant
And
| Ms Sully |
Respondent
REASONS FOR JUDGMENT
There is an impending final property settlement hearing on 29 October 2018 between Mr Sully (the husband) and Ms Sully (the wife). That was set down months ago and this interlocutory dispute relating to objections to subpoenae has been brought on quickly.
As needs no restatement, the financial disclosure obligations of all parties to a financial dispute are wide and absolute. This case is no different.
The immediate dispute arises out of the rejection by a registrar of the husband’s objections to four subpoenae issued by the court addressed to several banks. They sought documents relating to the finances and personal data of persons including the husband and the parties’ children but on my interpretation, also on persons unconnected with the parties to this marriage.
The registrar gave written and reasoned explanations for her rejection of the subpoenae objections which provoked a review. Although it is unnecessary for me to do more than acknowledge the registrar’s reasoning, it seems that the case was differently argued before me than before her. Suffice to say, as a review is a de novo hearing, I intend to examine the arguments afresh.
It is sufficient to start by saying that, with some hesitation, because the trial is imminent, I should take a pragmatic approach and rather than strike out the subpoenae as an abuse of process, I should allow the parties to rectify the problem which I highlight below. On my clear impression of the documents themselves, there are other individuals who are likely to have their privacy invaded by the scrutiny of all of what the banks have produced. Thus, no such inspection should occur until:
a)All individuals (and entities with which the husband has no connection) are formally served with a copy of the subpoenae; and
b)A return date is fixed in 10 days giving those named individuals an opportunity to file an objection and be heard on the specific return date.
Because that approach may still remain contentious having regard to the way the solicitors approached the issue, I consider that I should give them an opportunity for the sake of maintaining the efficacy of the trial to rectify what I suspect are the problems. These are my reasons.
Leaving aside momentarily, the absolute obligation to make disclosure of all documents relevant to the proceedings, the starting point is the rules of court.
The main purpose of the rules is set out in rule 1.04 of the Family Law Rules 2004 (Cth) (“the Rules”). The impending final hearing has been in the court’s system for almost three years. A strict approach to the determination of the immediate dispute may delay that trial which would be unfortunate if for no other reason than some of the criticisms of the courts as recently articulated in the media. Thus, looking at the rules, the decision, if have made as outlined, is a pragmatic solution to endeavour to keep the trial on track.
To a very large degree, I have kept in mind chapter 1 of the rules which sets out the philosophy that the court and its practitioners must follow. Rule 1.07 of the Rules is a good example.
Rule 1.10 of the Rules permits the court, unless a legislative provision requires otherwise, to make an order of its own initiative in relation to the rules. To some degree, that rule overcomes here the husband’s argument that a subpoena is a court order and cannot be varied and that an abuse of court process should result in such a subpoena being struck out.
None of this is to say that I agree with the way the matter has been approached by the parties and it is necessary for me to mention that in these reasons; I am very conscious of what rule 1.06 (a) to (j) of the Rules states.
As there is an argument in this case about whether certain persons whose documents were apparently captured by the subpoenae had been given notice of the request, because copies of the subpoenae were served on the registered offices of companies, I consider that service question or natural justice should be dealt with first.
Rule 7.11 of the Rules reads as follows:
A document that is required to be served by special service on a corporation must be served in accordance with section 109X of the Corporations Act 2001.
It is argued by the wife, who obtained the court’s permission to issue the subpoenae, that any director of an entity which is served with a copy of the subpoena, had been given notice of what she was doing and had the right to complain.
The Corporations Act2001 (Cth) provision says that documents “may” be served on the registered office but the section goes on the say that it does not affect any other law relating to service that may apply (but also see the discussion in Emhill Pty Ltd v Bonsoc Pty Ltd (2004) VSC 322 at [14] about statutory demands). There is also s 601cx of the Corporations Act2001 (Cth) which provides for service of documents on a registered office but that provision also refers to service on a company being effective if both directors of a two-director company are served. The legislation makes clear the importance of notice by service and that the courts have a role to play if there is a problem.
I remain unconvinced that service on an entity is the point because what the rules of this Court are referring to is a copy of the subpoena addressed to an organisation such as a bank. Unlike the bank which is obliged to comply with the court’s “order” to produce documents, the relevant rule is referring to the invasion of privacy of an affected person who must be given an opportunity to be heard.
Rule 7.02 of the Rules provides a wide discretion to the court to effect service of documents within its litigation process.
Rule 7.03 of the Rules requires that a subpoena be served according to rule 15.22 of the Rules making it clear that subpoenae that fit within the definition or description in that rule are in a category of their own. Of course, the service to which rule 7.03 of the Rules refers is that upon the recipient of the document. That takes me to that area of the rules.
Rule 15.22 of the Rules provides that a subpoena must not only be served (as here) on the banks but on the other party and any other interested person “in relation to the subpoena” (my emphasis). The message could not be more simple than here that a subpoena is an invasion of a third party’s privacy and accordingly, they should have the right to object. The rule goes on to provide that these interested persons must be served by ordinary service unless there is some agreement otherwise (my emphasis). Nothing in the rule mentions sending them, for example, a letter. Thus, it is not appropriate to simply capture documents of an unrelated person through this subpoena process by sending them a letter (either before or after the service on the bank); the rule provides a mandatory protection of their rights of privacy.
“Interested person” is defined to mean any person who has a sufficient interest in the subpoena and the dilemma that that creates is self-evident (my emphasis). As the issuing party has to serve whatever it is that the registrar has issued, a decision must be made whether or not the subpoena captures other persons whose privacy may be invaded. It was submitted by the wife that this could be taken to absurd lengths because a subpoena to a bank relating to a unit trust could be so wide as to include private details of discussions between unit holders who have nothing to do with the parties and the recipient of the subpoena. To a degree that has occurred here. The subpoenae seek notes of conversations with bank managers relating to directors and the like. As such, it is conceivable that there were discussions between those non-parties and the bank that were noted in the manager’s file.
Rather than simply strike out the subpoenae for failure to comply with proper service, I consider the problem can be solved by restricting the release of documents for inspection until all “interested parties” are given an opportunity to be heard. The mandatory nature of the rule cannot be ignored and service requirements cannot be lightly brushed aside. Thus, if it appears that the privacy of an interested party is to be invaded, proper service should be undertaken.
Despite authorities in relation to the obligations that befall parties who access and receive information through subpoena, it is small comfort to those who are unaware that their privacy is being trawled over. It also adds a further layer of complexity to such organisations as banks who, if required to produce administrative files, would have to interpret the subpoena, possibly redact certain details or lodge an objection. All of that would no doubt be an enormous cost to the community in a jurisdiction that requires assistance from non-parties.
These matters bring the focus back to the persons responsible for seeking to issue subpoenae as, in my view, they now have an added burden of deciding how to draw a subpoena such that interested parties are given notice if their privacy is to be invaded. I include in that view, the fact that other directors of a company other than the parties to the marriage have as much right to their privacy as the parties themselves. I reject the suggestion that service on a company is somehow a deeming provision on the basis that if the entity is served, the directors have notice.
Interestingly, the court has not had to deal with a large volume of disputes about subpoenae over the years and if anything, the recent amendments to the Rules have made the position more strict for the reasons above.
In respect of basic principles as I see them, in Cahill & Cahill & Anor [2013] FamCA 176, I said:
[13]In Hatton v Commonwealth Attorney-General & Ors[2000] FamCA 892; (2000) 26 Fam LR 570, the Full Court of this Court reviewed the various relevant authorities. That decision predated the current rules but it is still instructive as to the proper approach of a court considering an objection to production of documents because the current rule (15.26) does not set out any guide as to the circumstances under which an objection can or should be upheld.
[14]Chapter 13 of the rules and particularly Rules 13.19 to 13.22 are important considerations here because they apply to the obligations of parties themselves. To avoid the involvement of non-parties, the focus in those rules is on the obligation of the party to provide documents … the husband argues there is a connection between these entities and the wife and indeed between the brother and mother and the wife such that he may not have been able to get directly from the wife, the information about which he has a belief or perception. My concern is whether endeavours have been made to seek out the wife’s position before the invasion of the non-parties has occurred.
[15]The Full Court in Hatton supported the approach taken by Moffitt P in National Employers’ Mutual General Association Ltd v Waind and Hill [1978] 1 NSWLR 372 which provided that a subpoena could be set aside where it was used for the purpose of discovery. That arises in a number of ways but the usual one is that the recipient has to work out and make a judgment call as to what documents are required. That is usually overcome by careful drafting.
[16]In family law proceedings such as here where an extended family member is served with a subpoena, the size and extent of the pursuit may also become oppressive leading to questions being asked as to why the inter-parties discovery has not been undertaken but also whether the documents pursued have sufficient relevance to the issues in dispute between the parties.
[17]In general civil litigation, even with some modern restrictions, discovery is available but in this jurisdiction, there is an obligation on each of the litigants to make full and frank disclosure first. Thus, it ought to be obvious that if disclosure is not made properly by a party, then a subpoena to a non-party is reasonably justified but then the draftsperson must still be able to point to the relevance of the documents sought.
[18]It is timely to remember that a subpoena is a court order with consequent sanctions and the privacy of the recipient is being invaded even if that person is a close relative of the litigant party.
(my emphasis is added)
That decision preceded the recent amendment to the rules which seem to have added with emphasis the issue about the “interested persons” but I hope my logic was clear.
Other decisions were canvassed in helpful submissions by counsel for both parties bearing in mind it is the husband who has objected to the subpoenae. The banks who were the recipients of the document have remained silent and the court had not heard from any of the “interested persons” but that may have come about because they had only been given some formal notice after the registrar’s determination.
Counsel for the wife valiantly endeavoured to say that the service on the corporate entity was sufficient and that those interested had notice but that does not comply with the rule. He also pointed to the absurd position that could arise if everywhere remotely affected had to be served but as I have already said, the drafting has to contemplate the very problem that arose here. Uncertainty can cause problems and I am satisfied it did here but in my view, it is not an insurmountable problem for the reasons that follow.
Counsel for the husband described the subpoena drafting as breathtaking and an abuse of process but the response to that is that the banks were not upset. In reality, the extraordinary breadth of the drafting has meant that consideration should have been given to the probability (not possibility) that non-party privacy would be invaded.
The generic document sought that the relevant bank provide documents in relation to the husband, the parties’ four children and 53 entities. Even if these entities were all controlled by the husband (and they were not), is the recipient really expected to laboriously gather all of the following:
·various bank accounts (some named and numbered but others described as “all other accounts not listed…from 1 July 2014 to date);
·applications, proposals, expressions of interest. Agreements, contracts, memoranda of understanding and offers (including for avoidance of doubt, any documents or other written information in relation to the valuation or development feasibility of real property);
·diary notes;
·file notes;
·managers’ notes;
·correspondence including but not limited to, letters, emails, facsimiles and records of telephone conversations.
That drafting is breathtaking and I consider it extraordinary that the recipients did not object.
It is extraordinary if that action was taken without the husband being asked to produce that array of paperwork, regardless of whether or not he had an absolute obligation under the rules to produce it in his disclosure, one must ask why. To be clear, if the evidence shows that the husband had refused, or ignored, the request for production (having not produced it voluntarily anyway) or in some way could be shown to be untrustworthy or deliberately recalcitrant, the position might (but not necessarily would) be different.
The evidence in this case provides some assistance into the background. The solicitor for the husband (the objecting party) said that after the subpoenae were issued on 2 August 2018, copies were received for the husband on 6 August 2018. One must assume as the husband was represented by solicitors on the record, that letter satisfied the obligation under the rules. Nothing on the court file indicates service on anyone else.
The solicitor then began to argue the husband’s case for the objection saying that they were an abuse as an improper substitute for discovery, were fishing and in any event, the documents had no apparent relevance to the proceedings. Much of that (and in particular, the last point) must be seen to have arisen because of a breakdown in communication between two experienced legal practitioners. The solicitor went on to say that although she had only been acting for the husband for a while, she had reviewed correspondence from the firm previously acting for the husband and was not aware of any requests for disclosure in relation to the documents in the subpoenae (my emphasis). She agreed there were requests for discovery in June and July but did not say how the husband had responded to them.
The husband’s solicitor was given instructions to complain about “third party interests” and various entities were nominated. The complaint was about procedural fairness and one must conclude that the solicitor was conscious of the reference in the Rules already discussed above. The rest of the affidavit pointed out the interests, or lack thereof, that the husband had in these various entities but one must assume that the wife’s practitioners were aware of that because of the depth of detail to which they had gone. On reading the evidence therefore, nothing answered the two questions of why interested parties had not been served and why, if the solicitor’s assertion was correct about discovery, the discussion (or request for) about documents had not occurred.
The solicitor for the wife (the issuing party) filed an affidavit for the purposes of the review and as there was no affidavit material on the court’s file, I have concluded that I had the benefit of much more information than did the registrar. It behoves parties not just to come along on these objections’ hearings to argue their points; they must also provide evidence upon which the court can rule. For example, where was the evidence of service? Where was the evidence of the interests of non-parties described? Where was the evidence of relevance? Where was the evidence of recalcitrance to justify the issuing of the subpoenae in the first place?
The solicitor for the wife said that the subpoenae included companies most of which were entities of which the husband was a director. That therefore did not include all entities but it missed the point of how the interested persons might be affected and who they were. The detail of how and when the subpoenae were issued and received back for service followed, but it did not mention how any discussion had taken place between lawyers beforehand. Reference was made to a letter being sent to the registered offices of the entities, but that was well after the determination by the registrar. Those letters invited the companies to attend and object if they desired but that said nothing about compliance with the rule. Is a letter enough? Not on my reading of the rule.
In relation to the documents pursued, the affidavit went on to say [17] that the solicitor’s “records” indicated that the relevant bank statements had “not been disclosed or provided by the husband” as at the date the subpoenae were issued. However, on 6 November 2017, there had been a letter sent to the husband’s previous solicitors requesting he produce all details for all accounts to which he had access. The affidavit was silent on what response was received. After the subpoenae were provided to the husband’s solicitors, they wrote and enclosed documents pursuant to their client’s “ongoing duty of disclosure”. That of course does not indicate whether this was part of the husband’s practice of providing documents in a timely manner nor does it indicate whether there had been any previous request that was not answered.
On 7 May 2018, the husband’s solicitors were copied into a letter that the wife’s solicitors sent to their own expert business valuer. It was said that this related to issues about a “feasibility analysis” of various real property developments. There was what was described as a “partial response” to what the valuer had apparently been asking about. Rather than clarify anything, this showed that there had not been open and direct communication between the lawyers (and if necessary including the valuer) as to what was needed to advance at least the wife’s case. The affidavit then picked up a point about the fact that the husband was maintaining there was no such feasibility study and the wife’s counsel decried that as unlikely. Even so, why was there not a discussion about that point and co-operation about approaching whoever would have known the correct answer if the husband did not know? I consider the affidavit does not assist me because there may not be a dispute but I find it perplexing why the parties did not approach this in an open way. There was no suggestion of old-fashioned interrogatories (or questions) and no suggestion that the husband was deliberately hiding something sufficient to insist on an interlocutory hearing to force compliance. I reject the suggestion that the court does not have the resources to undertake that task and to the extent that there is a cost issue, hindsight might show us that the community’s costs have been impacted unnecessarily here.
The affidavit set out what the husband had provided and it appears significant but I am unable to discern whether there is a suggestion of recalcitrance on his part. The wife’s counsel pointed to an order in the very early stages of these proceedings which does not seem to have arisen out of any proactive role of the court but rather, the consensual agreement of the relevant solicitors at the time.
The affidavit then set out the interconnection between the husband and the various entities but in doing so, it referred to a Mr QQ as a director and the respective shareholdings of the directors, in particular, the husband. That must have come from either searches of government records or from what the husband had disclosed. It should have alerted the person drafting the subpoenae to the “interested person” concept.
The conclusion from the evidence is that the wife has an enormous amount of information about the various entities but little was said about demands to the husband for more. The provision of information is referred to by the wife’s solicitor as part of the disclosure obligations but nothing would enable me to conclude that the husband has been recalcitrant.
Counsel for the wife submitted that the original order obviated the necessity to give the husband notice before issuing any subpoenae. I reject that for the reasons earlier mentioned about obligations of lawyers. Having regard to the way the rules are drawn, if a request is made for documents, whether one-off or on an on-going basis, and the client refuses to respond to that absolute obligation, the duties of the lawyer under the Rules are clear. If the husband then becomes unrepresented, his continued recalcitrance would justify either an interlocutory application where he would be at risk of a costs order or alternatively, if the registrar was satisfied that there was such recalcitrance, a subpoena should issue.
The submissions of counsel did not advance the matter all that much. Counsel for the husband said the wife had not shown relevance of the many documents she was seeking. He submitted (and it was not denied) there had not been a complaint about the husband’s disclosure at least until after the event and even there, I remain unsure what it is that the husband has not done. Picking up the interested persons point, counsel for the husband submitted this was an intrusion into third parties’ rights and gave rise to a procedural fairness issue. I accept that submission. He also submitted that the subpoena was too wide and whilst I agree, the provider of the documents seems to have thought otherwise. In my view, that sort of drafting is to be discouraged.
Counsel for the wife valiantly defended the position taken as I have already described and submitted that there were “classes of documents” that the husband could not provide. If so, why was the subpoena not directed to those who had the property in the document? Why was the husband not asked to approach such persons? What accountancy practice was the husband asked to provide authority to and the same question must be asked of his banks.
In respect of the “feasibility study”, which the husband denies exists, a lot must be done before going through the banks could be seen as appropriate.
I started by indicating that with some hesitation, I would not strike out the subpoenae but only because of the impending trial. In my view, if the husband cannot, or will not, provide assistance in respect of the production of whatever documents the wife, and her expert, wants then the subpoenae, as currently drafted, should be served on any person whose privacy must be seen by the very nature of what has happened here to have been the subject of an invasion of privacy.
I propose to adjourn the matter to 10:00am on 12 October 2018 for these matters to be sorted out between the parties. If they are not, on that date, I will reconsider whether the subpoenae are an abuse of process in the circumstances.
I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 2 October 2018.
Acting Associate:
Date: 2 October 2018
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