Husband Opposes Subpoena Orders
Haldar & Santosh [2022] FedCFamC2F 1594 (22 November 2022)
A subpoena was issued by the wife to the husband’s father’s company. Both the husband and the director of the company, being the husband’s father, object to the production of documents. The Court, in making its orders determined whether the husband has unfettered control of the company or the company is at the least a financial resource for the husband.
Facts
These are parenting and property proceedings. The parties married and commenced cohabitation in 2014. They separated in July 2019. On 7 July 2022 the wife filed and served a Subpoena to produce documents to B Pty Ltd. (“B Pty Ltd”.) The director of this company is the husband’s father. The Subpoena sought production of (1) A copy of this Subpoena (2) Copies of: 2.1 the Constitution, memorandum and/or articles of association; 2.2 income tax returns, company tax returns, financial statements (including balance sheets, detailed profit and loss accounts, notes to the accounts, directors report and statement, and accountants or auditors reports); 2.3 company activity statements and income activity statements; 2.4 statements of bank accounts; 2.5 statements of loan accounts; 2.6 employment records for the husband; 2.7 ledgers for any loan or other credit facility between the husband and B Pty Ltd; 2.8 fringe benefit tax returns of B Pty Ltd for the period 1 July 2013 to present.
This is a determination of the Application for Review of the determination by the Judicial Registrar on 22 August 2022 filed by the wife on 14 September 2022. Such application presses for the production of documents by B Pty Ltd as set out in paragraphs 1, 2 and 3 of the Schedule. Thus documents as sought in paragraph 4 of the Schedule are not pressed. During the course of the hearing the wife advised that paragraph 3 of the Schedule was no longer pressed. Both the husband and the objector advised that they had no objection to the documents being produced as ordered by the judicial registrar.
The wife deposes in her affidavit filed 24 May 2022 that: the husband “operates” B Pty Ltd and throughout the parties’ cohabitation and post separation has had unfettered control of the company accounts and uses company funds to pay for personal living expenses including personal shopping, dining out, holidays and TAB bets; In the period 1 July 2019 to 31 January 2022 the husband made drawings on his loan account with B Pty Ltd of an unspecified amount. Annexed to the wife’s affidavit is a statement for the loan account for the period 1 July 2019 to 31 January 2022 for B Pty Ltd which appears to record extensive and numerous expenses being paid for the husband including groceries, speeding and parking fines to NSW Revenue, clothing, haircuts and dining out. Annexed to the wife’s affidavit are the husband’s income taxation returns recording that the husband’s taxable income for the 2019 financial year was $136,920, for the 2020 financial year was $92,620 and for the 2021 financial year was $35,950.
During the period of cohabitation the parties paid rent to the husband’s parents in the sum of $8000 per month. The wife deposes that the husband would receive income from the “family company” in the same amount as the rent and pay that income/rent back into his parents loan account. The wife worked at B Pty Ltd from January 2016 until 2019. During this time the wife observed that deposits from clients were mainly paid in cash and the husband received the cash personally from these bookings.
The husband deposes in his Affidavit filed 11 July 2022 that during the marriage he worked on a full-time basis as the general manager of B Pty Ltd. He is not and has never been an officeholder or shareholder of the company. The husband is currently employed as the manager of the company. This role requires him to oversee all events and ensure all events run smoothly. From his employment he has been provided with the benefit of a company credit card which he uses for both company and personal expenses. On any view, the financial circumstances of the husband are closely interwoven with those of the company.
The husband objects to the production and inspection of the balance of the documents sought in the subpoena on the following grounds: relevance; fishing expedition; and no forensic purpose. The third-party recipient of the subpoena being the company by way of the husband’s father as director objected for the reason that the documents sought are not relevant and are therefore an abuse of process; the subpoena is a fishing expedition; and the scope of the subpoena is oppressive.
Issue
Whether the objector is to be required pursuant to the Subpoena to produce the subject documents.
Applicable law
McMillan Incorporated v Bishopgate Investment Trust [1993] 4 All ER 990 - provides that ihilst 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.
Trade Practices Commission v Arnotts Ltd (no 2) [1989] FCA 340 - provides that a subpoena must not cast a serious and unfair or reasonable burden or prejudice upon the respondent to the subpoena.
Analysis
On the whole the documents sought have a forensic purpose and are therefore not an abuse of process. The wife’s evidence supports the closely intertwined financial relationship of the husband and the company. It is the husband’s case that, as a mere employee of the corporation he would not in the ordinary course have access to the documents sought by the wife to be a legitimate forensic purpose for the purposes of disclosing them pursuant to Chapter 6 of the Rules. The only forensic process whereby the wife can achieve access to the relevant documents is by way of subpoena.
The documents sought are focused, readily identifiable and should be able to be readily produced as they comprise normal documents produced and received in the ordinary course of business. In circumstances where there is no evidence that the husband has a proprietary or beneficial ownership, the constitution and other material contained within paragraph 2.1 of the schedule is irrelevant. The wife ought to have the capacity to have an understanding as to the asset and liability position and trading circumstances of the company including the benefits received by the husband’s parents when compared to the husband and the husband’s brother so as to enable an assessment as to the proportionality of the interwoven financial affairs of the husband with the company. The company taxation returns permit a verification as to the integrity of the financial statements.
Conclusion
The Orders of 22 August 2022 are discharged. The Schedule to Subpoena to B Pty Ltd filed 7 July 2022 is varied to read as follows: a. A copy of this Subpoena. b. Copies of: i. company tax returns, financial statements (including balance sheets, detailed profit and loss accounts, notes to the accounts, directors report and statement, and accountants or auditors reports); ii. statements of bank accounts; iii. statements of loan accounts between Mr Santosh and B Pty Ltd; iv. employment records for Mr Santosh; v. ledgers for any loan or other credit facility between Mr Santosh and B Pty Ltd and any applications for finance executed by the Husband in his role as general manager of B Pty Ltd; and vi. fringe benefit tax returns of B Pty Ltd for the period 1 July 2013 to present. Within 42 days the Proper Officer, B Pty Ltd shall produce the documents listed in Order 2 to an officer of the Exhibits Section, Federal Circuit and Family Court of Australia, Sydney Registry in the state of New South Wales.
