Woley & Humboldt (No 3) - [2009] FamCA 546

FAMILY COURT OF AUSTRALIA

WOLEY & HUMBOLDT (NO. 4)

[2009] FamCA 546

FAMILY LAW – RULING

Family Law Act 1975 (Cth)

Hatton, VF & Attorney-General of the Commonwealth of Australia (2000) FLC 93-038
Hudson Timber and Hardware Ltd v Chaudhary Group Pty Ltd [2002] FCA 832
Portal Software International Pty Ltd v Bodsworth, [2005] NSWSC 1115
Trade Practices Commission v Arnotts Ltd (No 2) (1989) 21 FCR 306
White v Tulloch (1995) FLC 92-640

APPLICANT:

Ms Woley

RESPONDENT:

Mr Humboldt

FILE NUMBER:

MLF

1685

2005

DATE DELIVERED:

25 June 2009

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

THE HONOURABLE JUSTICE CRONIN

HEARING DATE:

1 May 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr St John SC

SOLICITOR FOR THE APPLICANT:

MARSHALLS & DENT

COUNSEL FOR THE RESPONDENT:

Mr Geddes QC

SOLICITOR FOR THE RESPONDENT:

KENNEDY WISEWOULDS

IT IS NOTED that publication of this ruling under the pseudonym Woley & Humboldt is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 1685 of 2005

MS WOLEY

Applicant

And

MR HUMBOLDT

Respondent

RULING

On 25 February 2009, the wife issued a subpoena to the husband’s mother. That subpoena sought:
(a)all powers of attorney “granted” by the husband’s mother;
(b)all documents executed by the husband’s mother concerning a variety of companies and entities; and
(c)the “complete general ledger” maintained by SN Pty Ltd “including for the entities” referred to in (b) above.
There was much debate about the necessity to issue this subpoena. There had been hearings before Bennett J in 2008 and specific discovery disputes before Bryant CJ in August and December 2008.
This particular dispute revolves around the question of whether documents should be produced on the grounds of relevance.
Senior counsel for the husband did not take issue with items (a) and (b) of the subpoena to which I have referred.
The dispute revolves around the ledger and just what it is and contains.
On 11 December 2008, Bryant CJ made an order that by 18 December 2008 or as soon thereafter as was practicable, the husband was to provide to the wife copies of inter alia:
The general ledger of [SN] Pty Ltd (being contained in a general ledger for a consolidated account) in its capacity as manager of the [N] Trusts Partnership from 1 July 1989 or the earliest point at which the ledger is in existence, whichever is later, to 30 June 2006.
There has been much dispute during the trial as to whether the husband complied with that order but I have made rulings in respect of it.
The wife now proceeds to pursue the comprehensive ledger by the subpoena filed 25 February 2009.
The husband has objected to the subpoena noting that although it is addressed to his mother, he manages her affairs.
In her affidavit of evidence in chief filed 19 December 2008, the wife said:
Throughout these proceedings, [Mr Humboldt] (the husband) has disputed that he controls the “[Humboldt] Group” of companies and trusts and alleges that he has been merely “employed” to manage the companies and trusts of which his mother is a director and/or appointor. I dispute [the husband’s] assertion and say that he has had the effective control of the [Humboldt] Group since at least the middle 1990s.
In his trial affidavit, the husband said that he continued to manage his mother’s affairs. He said that whilst he had responsibility for the day to day management of the various entities and the financial affairs of his mother, he was employed to do just that. He disputed that he exercised legal and/or “de facto” control over the entities or his mother’s affairs.
The husband said that arising out of orders made by Bryant CJ on 25 August 2008, the expert accountants met at the offices of SN Pty Ltd and “all documents and records were made available for inspection and copying”. Despite that, according to the husband, the wife sought further documents which he refused to provide culminating in the hearing before the Chief Justice to which I earlier referred.
In an affidavit in reply to the husband’s affidavit, the wife said that she relied on the report of her expert accountant who was unable to conclude his report by the date ordered and that in any event, the accountant, Mr F did not get all of the documents that he wanted.
The onus of establishing the relevance of the documents lies with the party who requests them under the subpoena.
Mr St John SC on behalf of the wife argued that the extent of the husband’s management and/or control of the various entities and the benefits that the husband would receive upon his mother’s death were relevant to the issue of the value to the husband of that property/financial resource. As such it was argued, with limited information made available to him, Mr F could only make assumption “and/or reach conclusions” by comparing annual accounts. Importantly, counsel for the wife argued:
Mr [F] has made clear the necessity for him to make assumptions and/or interpretations of financial statements to explain entries because of the unavailability of the consolidated ledger.
Mr Geddes QC argued that there was no relevance in these documents any longer because as a result of a joint meeting of the wife’s expert and the husband’s expert, agreement was reached about any issue that might draw upon the information contained in the ledger. That was leaving aside any question about the fact that the husband had complied with the order of the Chief Justice dated 11 December 2008.
Subsequent to the orders of Bryant CJ, the wife filed an affidavit on 16 January 2009 sworn by Mr F. This affidavit attached as an annexure, a comprehensive report by Mr F in which he traversed the areas of dispute between he and the husband’s expert Ms B.
Mr F identified that the question of whether the husband exerted significant control over the N First Trust and the N Second Trust was a matter to be determined during the final hearing. He was consequently instructed to provide information in respect of the source of income generated by those two trusts as well as the inter-relationship between the various entities.
Mr F noted that prior to the hearing before Bryant CJ, he requested the SN Company MYOB ledger relating to a Drawings Loan Account.
Mr F checked entries in the schedule that he received and found a variety of what he described as “differences”. He was highlighting the distinction between the drawings loan schedule and the narration in the SN Company MYOB ledger. He concluded that it was the narration in the ledger that was insufficient. He made an assumption as a result of that discrepancy that the drawings loan schedule was the accurate representation as to the transaction.
Mr F identified a variety of transactions and using the assumption, came to a conclusion. In respect of his analysis of an account with UBS, he received various documents including the general ledger of SN Company in its capacity as manager of the N Trusts Partnership from July 1989 through to 30 June 2006. In respect of what he was pursuing, he noted that the general ledger information provided by the husband was “deficient” as the general ledger had not been provided for all accounts in the N Trusts Partnership. He noted that notwithstanding the order of Bryant CJ to provide the general ledger to 30 June 2006, the period from 1 July 1988 to 30 June 2005 of the “general ledger for the UBS account” was not provided. He subsequently received further documents enclosing the UBS account.
Mr F then said that he completed his analysis of the UBS account based on the information he had but the level of that analysis was “limited by not receiving the general ledger of the UBS account for the period 1 July 1988 to 30 June 2005 and the statement of the UBS account for the period 1 July 1989 to 30 June 2003”. In this comprehensive report, similar remarks about his analysis were made. For example, in the AXON Proceeds analysis, he requested the SN Company MYOB ledger so that he could expand the AXON Proceeds analysis but the documents were not provided.
At paragraph 10.66 of his report, Mr F said:
As part of my analysis and as a consequence of my discussions with the Husband, it became obvious that for accounting purposes, a number of the Admitted Entities are treated as part of a group that included the Non-Admitted Entities. That is the general ledger for these entities is maintained within the [SN Company] MYOB ledger and all transactions for these entities are generated from the bank accounts held by the Banking Entities.
Mr F then noted that he had had to complete a statement of funds movement for the various years because he did not have access to the MYOB SN Company ledger.
At paragraph 10.70.6 Mr F said:
I completed a review of the financial statements for the Non-Admitted Entities, but was not able to ascertain either the destination of the sales or the reason for the transactions. Without access to the [SN Company] MYOB ledger I am unable to conclude in respect of these transactions.
Mr F then concluded that there are a number of transactions that were identified that were either not reasonable or not necessary.
Having said all that, Mr F still completed his analysis based on the information that he had.
The analysis left the two experts that is, Mr F and Ms B, at odds over a number of matters as a consequence of which they met and prepared a joint report on 3 March 2009.
The report noted agreement about a number of matters but recorded that Mr F was not able to complete an analysis of all transactions recorded in the general ledger of SN Pty Ltd. The report noted also that despite the limitations of the documents provided, Mr F amended the schedule presented with his earlier report and made some accounting adjustments. Interestingly, both experts agreed that in all material instances, the correction of any anomalies that they had identified resulted in their being no residual issue or effect on the resulting balance sheets of the affected entities.
However, there were areas of disagreement.
Mr F does not say in the joint report of experts that he needs further documents.
Mr St John SC on behalf of the wife maintained that the husband’s position about the agreement between the experts did not mean that the documents pursued by the wife were not relevant. He pointed to the fact that the husband was arguing that they were no longer necessary but that did not make them irrelevant.
Whilst Mr St John conceded there had been a form of agreement between the experts, he maintained that Mr F had not been given various documents and that he wanted them to fully substantiate and validate opinions that he had expressed.
Notwithstanding Mr F made no reference to requiring further documents, it is clear that his report and agreement is based upon assumptions he has made but also on the basis of his own cross-checking analysis from other accounting documents. On the evidence therefore, I have little understanding of exactly what Mr F’s real position is.
The starting point is for the wife to establish that there is some apparent relevance of the documents referred to in the subpoena to some issue in dispute in the proceedings.
In Hatton, VF & Attorney-General of the Commonwealth of Australia (2000) FLC 93-038 the Full Court noted that given that there were no pleadings in the Family Court of Australia, the only way in which “apparent relevance” of the subpoenaed material to the main property settlement proceedings could be established was by reference to the affidavit material filed in those proceedings.
The relevant affidavit material is limited to what I have set out above noting particularly that whilst Mr F may have agreed with Ms B, his evidence (and hers) has only been filed and not yet tested by cross-examination. The assumptions of either or both experts may not necessarily be accepted as the basis for their respective opinions.
How then is the relevance of this SN Company ledger to be assessed?
In Hudson Timber and Hardware Ltd v Chaudhary Group Pty Ltd [2002] FCA 832 the Full Court of the Federal Court examined the issue of apparent relevance and said that the relevant principles governing the obtaining of documents on subpoena which have “apparent relevance” were that inter alia:
(1)The relevance of documents was not limited to documents directly admissible in themselves in proof of an issue raised in pleadings; and
(2)If a class of document which has material forensic relevance could be shown to exist, then a subpoena would not normally be set aside.
In White v Tulloch (1995) FLC 92-640, the Full Court of the Family Court referred to the test in terms of documents having "a sufficient apparent connection to justify their production or inspection".
In Trade Practices Commission v Arnotts Ltd (No 2) (1989) 21 FCR 306, Beaumont J saw relevance as something where a document "could possibly throw light on the issues in the main case".
In Portal Software International Pty Ltd v Bodsworth, [2005] NSWSC 1115, Brereton J looked at a number of authorities including of this Court and said:
Thus it is plainly not the question at this (first) stage whether the documents, production of which is sought, will definitely advance the case of the parties issuing the subpoena, nor whether they will be admissible in evidence at the trial. It is sufficient that they could "possibly throw light" on the issues in the substantive proceedings, or that it appears to be "on the cards" that they will do so. What are the issues in the proceedings will appear from the pleadings (where there are pleadings), the affidavits, and the legal principles which govern the claims for relief in the substantive proceedings.
As I have indicated, there may very well be an agreement between the experts and there may very well be some dissatisfaction of the wife and her advisers about what assumptions Mr F has made because of what documents he had to work with but the complete SN Company ledger may shed some light on the control of the husband which is said to be inconsistent with his assertions. Similarly, it must be said that what both of the experts have said may not be their final or even admissible evidence.
If it turns out that this is not material that makes any difference to the outcome of the proceedings, the time and effort wasted can be ameliorated by an order for costs. Conversely, if this should have been disgorged earlier, that situation too might give rise to an argument about time being wasted.
On that basis, I find that there is apparent relevance to an issue in dispute and the husband must provide to the wife the documents referred to in category 3 of the subpoena.

I certify that the preceding Forty Five (45) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate:

Date: 25 June 2009