Walters and Walters and Anor
[2017] FamCA 502
•17 July 2017
FAMILY COURT OF AUSTRALIA
| WALTERS & WALTERS AND ANOR | [2017] FamCA 502 |
| FAMILY LAW – Practice and Procedure – Subpoena for Production of Documents – Where objection on the ground of legal professional privilege – Where consideration of applicable principles –Where objection not made out – Leave to inspect granted. |
| Evidence Act 1995 (Cth) s 118 Family Law Rules 2004 (Cth) r 15.23, 15.26 |
| Baumann and Ors & Rushbrooke and Anor [2016] FamCA 905 Esso Australia Resources Ltd v Commissioner of Taxation (Cth) [1999] HCA 67 Strahan & Strahan [2013] FamCAFC 203 X Corporation Pty Ltd & Jess and Anor [2016] FamCAFC 43 |
| APPLICANT: | Mr Walters |
| RESPONDENT: | Ms Walters |
| OBJECTOR: | B Pty Ltd |
| FILE NUMBER: | DUC | 420 | of | 2014 |
| DATE DELIVERED: | 17 July 2017 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Foster J |
| HEARING DATE: | 4 May 2017 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | No appearance by McPhee Kelshaw |
| COUNSEL FOR THE RESPONDENT: | Ms Eldershaw |
| SOLICITOR FOR THE RESPONDENT: | Campbell Paton & Taylor |
| COUNSEL FOR THE OBJECTOR: | Mr Maddox |
| SOLICITOR FOR THE OBJECTOR: | Baldock Stacy & Niven Pty Ltd |
Orders
That the Notice of Objection to Subpoena filed 2 March 2017 be dismissed.
That the application for costs of compliance with the subpoena be dismissed.
That any application for costs of the objection hearing be made by way of written submission filed and served within 28 days from this date with any submissions in response to be filed and served within a further 14 days, thereafter judgment reserved to chambers.
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 Walters & Walters 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 PARRAMATTA |
FILE NUMBER: DUC 420 of 2014
| Mr Walters |
Applicant
And
| Ms Walters |
Respondent
And
| B Pty Ltd |
Objector
REASONS FOR JUDGMENT
The application for determination is as to the Notice of Objection to Subpoena filed by B Pty Ltd (BPL) as to a Subpoena to Produce documents issued by the wife on 17 February 2017 and addressed to Baldock Stacy and Niven, Solicitors (BSN).
There is no issue as to part of the documents requested by the Subpoena.
There is objection to the following documents:
All files opened by BSN including all file notes, written advice, advice obtained from counsel, correspondence, deeds, memoranda and all other documents in relation to the following matters:
…
b.Advice given to [C] Pty Ltd and or its director or nominee in respect of:
…
vi.Shareholders Agreements including that dated 30 April 2013 and any amendments or variations thereto.
c.Advice given to [BPL] and or its directors or nominee in respect of:
i.Amendment or variation of Shareholders Agreement(s);
ii.Acquisition and purchase of business conducted by K Holdings Pty Ltd;
d.Sale of shares held by [D] Pty Ltd in [E] Pty Ltd;
e.Sale of shares held by [D] Pty Ltd in [F] Pty Ltd
The objections raised by counsel for BPL are that firstly, the subpoena is a fishing expedition in that the documents sought have no apparent relevance to the matters in issue and, secondly, that of client legal privilege.
It is a mystery as to why subpoenas were not addressed to the entities themselves named in the subpoena addressed to BSN as many of the documents sought would normally comprise day-to-day business and corporate records of those entities.
The objection must be considered in three stages: firstly, whether BPL has standing to object to the categories of documents sought, secondly, whether the documents have apparent relevance to the proceedings and, if so, thirdly, whether client legal privilege attaches to part or all of the documents objected to.
Context
The husband and wife married in 2003 after about 12 months’ cohabitation. They separated in June 2013. There are four children of the relationship now aged 13, 12, 10 and six. Final parenting orders were made in March 2017 that see the children living primarily with the wife and spending time with the husband.
The present application is in the context of ongoing property issues.
The husband deposes to the following (Exh “B”):
a)In October 2004 he began to subcontract his services through C Pty Ltd. The wife was sole director and primary shareholder.
b)Income was distributed to the parties by way of dividends to the wife and PAYG income to the husband.
c)In 2006 C Pty Ltd entered into a partnership with two other companies D Pty Ltd and G (later H) and the partnership traded as BPL.
d)In 2007 BPL purchased the business J and traded by that name.
e)In 2008 the partners incorporated E Pty Ltd (EPL) as equal shareholders and EPL commenced to trade as J. The husband was appointed a director of EPL, notwithstanding that the wife was the sole director of C Pty Ltd, the parties’ EPL shareholder company.
f)In 2011 B Pty Ltd was incorporated with the primary shareholders as to 95 per cent being C Pty Ltd, D and H equally. Each of the shareholder companies were paid consultancy fees of $13,750.00 inclusive of GST per month and dividends from time to time.
g)In 2012 BPL acquired the business K so as to expand into manufacturing and in consideration K acquired 20 per cent shareholding in BPL.
h)The parties’ income continued to be received through C Pty Ltd.
i)Subsequent to separation the parties were in conflict as to financial issues. The husband unilaterally resigned from C Pty Ltd and commenced to subcontract himself directly to BPL at a salary of $121,000.00 per annum.
j)The parties remain in dispute as to the ongoing conduct of C Pty Ltd.
The objector’s contentions and the issue of standing
It was relevantly submitted that BSN acted for BPL in relation to:
a)Shareholders Agreements including that dated 30 April 2013 and any amendments or variations thereto but BSN did not provide advice to C Pty Ltd in relation to same.
b)Amendment or variation of Shareholders Agreement(s) and Acquisition and purchase of business conducted by K.
c)Sale of shares held by D Pty Ltd in E Pty Ltd.
d)Sale of shares held by D Pty Ltd in F Pty Ltd.
The category of documents sought are “All files opened by BSN including all file notes, written advice, advice obtained from counsel, correspondence, deeds, memoranda and all other documents…” in respect to 10. a) to d) above.
BPL has no interest in D or any interest in EPL. It is not in any position to seek to object to Subpoena on the matters set out in 10. c) and d) above. Any such objection must be by D, EPL or their solicitors themselves asserting their client’s privilege on instructions. No such objections have been filed. It is clear that BPL has standing as to 10. a) and b) above where the general category of documents are described so as to relate to “Advice given to [BPL] Pty Ltd and or its directors or nominee in respect of…”: (r 15.26(1) Family Law Rules 2004 (Cth)).
Apparent Relevance
In Baumann and Ors & Rushbrooke and Anor [2016] FamCA 905 Austin J set out a useful analysis of the well settled relevant legal principles (footnotes omitted):
…
2.The power of the Court to issue a subpoena is set out in Part 15.3 of the Family Law Rules 2004 (Cth) (“the Rules”). Equally, the Court has power to set aside a subpoena so issued: Hatton v Attorney General of the Commonwealth of Australia & Ors (2000) FLC 93-038 (“Hatton”).
3.The relevant stages of subpoenaing a third party to produce documents to the Court were described in Hatton at [38], by reference to National Employers’ Mutual General Association v Waind and Hill [1978] 1 NSWLR 372,as being a three step process:
The first [step] is obeying the subpoena, by the witness bringing the documents to the court and handing them to the judge. This step involves the determination of any objections of the witness to the subpoena, or to the production of the documents to the court pursuant to the subpoena. The second step is the decision of the judge concerning the preliminary use of the documents, which includes whether or not permission should be given to a party or parties to inspect the documents. The third step is the admission into evidence of the document in whole or in part; or the use of it in the process of evidence being put before the court by cross-examination or otherwise…This application by the applicant companies concerns the first step referred to in Hatton (supra)….
4.Rule 15.26 relevantly enables a person or entity named in the subpoena to apply for an order that the subpoena be set aside in whole or in part (r 15.26(1)(a)).
5.Further, r 15.26(1)(c) enables a person or entity to which a subpoena is addressed to seek “to be paid for any loss or expense relating to …the production of a document in compliance with the subpoena”.
6.A subpoena must only be used for a legitimate forensic purpose. In considering this issue, it is unnecessary for the party issuing the subpoena to establish actual relevance. However, the party issuing the subpoena must “demonstrate [that] the documents have an apparent relevance to the issue or issues before the Court and in respect of which the subpoena was filed”.
7.In that context, it is not enough for a party seeking to uphold a subpoena to show that the documents might lead to “a train of inquiry” which might assist his or her case. This is to be distinguished from the process of discovery where such a motive may be permissible.
8.While it is the case that the bar for establishing relevance is not high, the party seeking to rely upon the subpoena must nonetheless establish that it is “on the cards” that the documents would bear upon and have relevance to the issues in the substantive proceedings.
9.Expressed in the reverse, it is not legitimate to issue a subpoena on the basis of “an outside chance” that something useful might turn up in the documents.
10.A subpoena may also be at risk of being set aside if its terms are so wide that “…it imposes an onerous task on a stranger [to the litigation] to collect and produce documents many of which have no relevance to the litigation”.
11.In terms of “fishing”, it is not legitimate for a party to issue a subpoena with a view to determining whether the issuing party has a case at all.
12.In Unitingcare – Unifam Counselling & Mediation & Harkiss and Anor (2011) FLC 93-476, Coleman J undertook a useful analysis of the relevant authorities and noted at 85,857:
There is a material distinction between seeking production of documents which, if they exist, can be readily identified and produced in circumstances where such documents may be admissible in evidence, and seeking the production of unspecified documents in the hope that, when produced, they may reveal something capable of being admissible in evidence. The former course is permissible according to general law, and… the Act. The latter offends both.
13.In that same context, in Ryder & Lee [2009] FamCA 531, Burr J adopted the following passage from the decision of Gray J in Andrew Garrett Wine Resorts v National Australia Bank Ltd (No. 6) (2005) 92 SASR 419 wherein his Honour said at 428:
It is not enough for the party issuing the subpoena to raise a speculative possibility that the documents sought would assist the resolution of the dispute. The party supporting the subpoena must demonstrate that the documents sought in the subpoena are of real relevance to the issues in the case. It must be more than an outside chance that something useful might turn up in the documents.
14.In summary, it is not enough for a party issuing the subpoena to raise a “speculative possibility” that the documents sought would assist the resolution of the dispute. While the bar is not high, the party supporting the subpoena must demonstrate that the document(s) sought in the subpoena are of an “apparent relevance” to the issues in the proceedings. It must be more than “an outside chance” that something useful might turn up in the documents.
15.To avoid being set aside as merely “fishing”, or as being oppressive, a subpoena must specify with reasonable particularity the documents which are required to be produced.
16.As has been noted, a subpoena that is tantamount to discovery is likely to be set aside as an abuse of process. As an extension of that principle, it is impermissible for a subpoena to be used to rectify inadequate discovery by a party to the proceeding. In Macks v Tuck & Ors & QBE Insurance (Australia) Ltd (No.4) [2007] SASC 255 at [49], Bleby J said that in such a case:
It seems to me that the more appropriate course for the defendants to follow is to seek an order for further and better discovery from the plaintiffs, if they have a genuine concern about the adequacy of the plaintiff’s discovery and if they can point to reasons why that appears to be inadequate.
17.In considering subpoenas addressed to strangers to the litigation, the Court must balance the third parties’ right to privacy against the public interest in ensuring that litigants are able to properly present their case. In R v Barton and Ors [1981] 2 NSWLR 414 at 419, Cantor J pointed out that this requires a court to evaluate competing interests. His Honour said:
It seems to me that there is involved within this field the resolution by the Court of competing interests. To require a witness to produce to the court his documents in proceedings in which he is not a party and in which he has no interest must involve an invasion of his private rights including his right to privacy and his right not to be required to busy himself seeking, identifying, bringing together and producing his documents to the court.
The other right which seems to me to be involved is the right of a party to litigation to obtain access to documents, even where they are in the possession of a stranger, in order to further the ends of justice in those proceedings so that he may advance his case on all issues in the case. These respective rights of the stranger and the litigant will generally conflict.
In many instances a mere consideration of the nature of perusal of documents in such a subpoena will disclose that they have or may well have relevance to the issues in the litigation. On the other hand consideration of the nature of the documents sought in such a subpoena may indicate with equal clarity that on the face of the subpoena the documents do not and cannot bear any relevance to the issues in the litigation.
There is a significant area between these two extremes which is the area in which, it would appear, there is no simple guideline to follow. What is required, as I have stated, is a balancing of the competing and generally conflicting interests of the party to the proceedings and the stranger to the proceedings.
The Court will consider the nature of the documents specified and will determine as best it can the issues likely to arise. If it appears an issue may arise in litigation to which the documents may relate then I believe the right of the litigant should prevail over the right of the witness. Unless it appears that an issue may arise to which the documents may relate then the right of the witness will prevail.
18.Finally, as an alternative to setting aside a subpoena, the Court may instead choose to vary its terms.
The nature of the documents sought clearly have apparent relevance to the issues for determination as they form the commercial background to the present interest or entitlements of C Pty Ltd in BPL. The documents referred to in 10. a) and b) above are clearly relevant to the issues in this matter for determination and relate to the creation of the various corporate structures and their present shareholding and assets.
Legal Professional Privilege
Having established that the documents referred to in the subpoena have apparent relevance to the proceedings, it must be determined that the impugned communications are for the dominant purpose of providing legal advice to the client.
The “dominant purpose test” is set out in s 118 of the Evidence Act 1995 (Cth) as follows:
Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:
(a)a confidential communication made between the client and a lawyer; or
(b)a confidential communication made between 2 or more lawyers acting for the client; or
(c)the contents of a confidential document (whether delivered or not) prepared by the client, lawyer or another person;
for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.
and see Esso Australia Resources Ltd v Commissioner of Taxation (Cth) [1999] HCA 67.
The Full Court of this Court in Strahan & Strahan [2013] FamCAFC 203 had occasion to consider objections to the production of documents on the basis of client legal privilege and in doing so the issues of the dominant purpose test and adequate description of documents in respect to which privilege is asserted.
The onus is on those who assert privilege to adduce sufficient evidence to establish the claim (X Corporation Pty Ltd & Jess and Anor [2016] FamCAFC 43).
In Strahan Murphy J observed:
[30]….it is instructive to look to what the Full Court of the Federal Court said in Barnes (Barnes v Commissioner of Taxation [2007] FCAFC 88) (at [16] and [18]) about the claim for privilege made in the affidavit in that case:
This affidavit falls far short of providing any adequate basis for claiming privilege in respect of any individual document. It consists of assertions, conclusions and generalised comments. The documents referred to are from a number of sources. The further and better particulars of statement of claim furnished by the appellants refer to several different persons or entities who are said to have been originators of the documents. However, no evidence has been adduced from any of those persons. Most notable of all is the absence of any evidence from Mr Calder. In this context, the fact that Mr Barnes’ affidavit does not clarify the reason why any specific document came into existence means that the court is left to consider the documents on their face and determine as best it can whether the documents are privileged. This is unsatisfactory.
...
The authorities emphasise the need for focused and specific evidence in order to ground a claim for legal professional privilege. In Kennedy v Wallace [2004] FCAFC 337; (2004) 142 FCR 185 (Kennedy), Black CJ and Emmett J reiterated the principles that verbal formulae and bare conclusory assertions of purpose are not sufficient to make out a claim for privilege: see also National Crime Authority v S (1991) 29 FCR 203 at 211 (per Lockhart J); Grant at CLR 689 (per Stephen, Mason and Murphy JJ). Where possible the court should be assisted by evidence of the thought processes behind, or the nature and purpose of advice being sought in respect of, each particular document. The fact that generalised evidence is not challenged in cross-examination does not mean that such evidence must be accepted, particularly when it is as manifestly inadequate as it is in this case. As in Kennedy, mere general assertions of the purpose of creation of the documents are insufficient to discharge this onus. Even though in that case some evidence as to the purpose of particular records was adduced, Allsop J at [168] considered that the onus had not been discharged because the evidence did not permit a conclusion to be drawn as to the dominant purpose of the creation of any particular document or entry in a document. Simply to show that one purpose for creation of the document was to obtain legal advice or assistance is not good enough.
The extent and nature of the documents that are in existence in this matter are set out in Annexure B to the submissions on behalf of the objector. An electronic copy of the “privileged” documents has been produced to the Registry.
Whilst Annexure B contains perfunctory descriptions of the documents to which it is alleged privilege attaches, what it does not contain is evidence as to why each of the documents came into existence and the basis upon which privilege is asserted to attach to that document.
There is no affidavit evidence sought to be adduced in support of the asserted claim. Indeed no evidence at all save for counsel’s bald assertion that “the majority of the documents sought by the requesting party relate to the legal advice provided by BSN to BPL”.
As observed by Murphy J in Strahan:
[44] In Trade Practices Commission v Sterling [1979] FCA 33, Lockhart J said (at [5]):
It is not open to doubt that the court has power, in a proper case, to inspect documents where a claim of privilege is made to resist an application for inspection of documents by the opposite party. See Grant v Downs [1976] HCA 63; (1976) 135 CLR 674, and Westminster Airways Limited v Kuwait Oil Co Limited (1951) 1 KB 134 . However, it is as well to bear in mind what was said by Jenkins L.J. in Westminster Airways Limited v Kuwait Oil Co. Limited: “But there is nothing in the rule, or in the authorities, to constrain the court to hold that, in every case where a claim to privilege is made and disputed, the party seeking production is entitled to come to the court and (as it were) demand as of right that the court should go behind the oath of the opposite party and itself inspect the documents. The question whether the court should inspect the documents is one which is a matter for the discretion of the court, and primarily for the judge of first instance...” (1951) 1 KB, at p 146. (at p247)
A party cannot rely on the Court inspecting the impugned documents as a mechanism to rectify lacking or defective descriptions of those documents. In any event, in this matter there was no application for the Court to inspect the disputed documents and even then in the absence of evidence on the issue the Court would be required to infer from the nature of the document the purpose for it coming into existence and whether any asserted privilege is made out. Such a course is properly addressed by appropriate and relevant evidence adduced by the objector.
The failure to adequately describe and adduce sufficient evidence to establish the privileged nature of the disputed documents is fatal to the claim as to legal professional privilege and as such the claim has not been made out by the objector as to the documents referred to in 10. a) and b).
Costs of Compliance with the Subpoena
Accordingly, the Notice of Objection filed 2 March 2017 is dismissed.
BSN have produced documents the subject of the subpoena addressed to them. An order for costs of compliance is sought pursuant to r 15.23. The documents produced electronically are without doubt voluminous and would have taken considerable time to collate.
The sum of $25.00 has been tendered as “conduct money”. Such sum, it contended, is insufficient to meet “the reasonable expenses of complying with the subpoena”: Rule 15.23(1)(a).
Counsel for the Objector submits that costs of compliance were in the order of $6,000.00 plus. The inelegantly framed lump sum invoice asserts $3,487.00. There is no basis set out for the hourly rate nor any time sheets or detailed calculation of work done. There is no break up of work done to meet the subpoena itself and the work done so as to prepare a claim of privilege, which has now been dismissed.
In such circumstances the application for costs of compliance with the subpoena is dismissed.
Otherwise, any application for costs arising from the objection hearing should be made by way of written submissions. Orders will be made accordingly.
I certify that the preceding thirty one (31) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 17 July 2017.
Associate:
Date: 14 July 2017
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