Bergman and Bergman (No. 6)
[2008] FamCA 710
•4 August 2008
FAMILY COURT OF AUSTRALIA
| BERGMAN & BERGMAN (NO. 6) | [2008] FamCA 710 |
| FAMILY LAW – PROPERTY – Interlocutory hearing – accrued jurisdiction – Single justiciable controversy – Evaluation of the six Warby factors – Exercise of discretion – Whether respondents could or should be joined to the s 79 proceedings – Whether proposed respondents are “necessary parties” ss90AE and 90AF considerations |
| Family Law Act 1975 (Cth) ss 79, 90AE, 90AF and 90AK Family Law Rules 2004 (Cth) Rules 1.12,5.10 6.02, 6.03, 6.04 and 11.10 |
| AS & GW & AH (2006) FLC 93-265 Australia Securities and Investment Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559; (2001) 177 ALR 329 Bishop & Bishop (2003) 30 Fam LR 108; (2003) FLC 93-144 Christie & Christie [2007] FamCA 125; (2007) Fam LR 181 Fencott v Muller (1984) 152 CLR 570 H & H (2007) 36 Fam LR 64 Ireland & Ireland & Collier (Third Party) (1986) FLC ¶91-731; (1986) 11 Fam LR 104 K & K (2005) FLC 93-237; (2006) 34 Fam LR 266 Mckay & Mckay (1984) FLC ¶91-573;(1984) 73 FLR 313; (1984) 59 ALR 117 (1984) 9 Fam LR 850 Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 Prince v Prince (1984) FLC 91-501 Re Wakim; Ex Parte McNally and Ors (1999) 163 ALR 270 Smith & Smith (No. 2)(1985) FLC ¶91-604;(1985) 10 Fam LR 283 (1985) 81 FLR 251 (1985) 64 ALR 227 Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 Warby & Warby (2001) FLC 93-091; 28 Fam LR 443 B Pty Ltd and Ors & K & K (2008) Fam CAFC 113 |
| APPLICANT: | MR BERGMAN (via his appointed Case Guardian) |
| RESPONDENT: | MRS BERGMAN |
| POTENTIAL THIRD PARTY: | MR SARINSSON |
| POTENTIAL FOURTH PARTY: | MR PORTER | ||||
| FILE NUMBER: | MLF | 5245 | of | 2005 | |
| DATE DELIVERED: | 4 AUGUST 2008 |
| PLACE DELIVERED: | MELBOURNE |
| PLACE HEARD: | MELBOURNE |
| JUDGMENT OF: | YOUNG J |
| HEARING DATE: | 23 OCTOBER 2007, 18 and 19 JUNE 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | MR ST JOHN SC and MR STRUM |
| SOLICITOR FOR THE APPLICANT: | CAROLINE COUNSEL FAMILY LAWYERS |
| COUNSEL FOR RESPONDENT: | MR GEDDES QC and MS JOHNS |
| SOLICITOR FOR RESPONDENT: | MARSHALLS AND DENT |
| SOLICITOR FOR POTENTIAL THIRD PARTY: | IN PERSON |
| COUNSEL FOR POTENTIAL FOURTH PARTY: | CAREW COUNSEL |
| SOLICITOR FOR POTENTIAL FOURTH PARTY: | MS NIKOU SC |
Orders
THAT order 1 in the amended Application in a Case filed by the Case Guardian on 11 July 2007 be dismissed.
THAT order 1 in the Application in a Case filed by the Case Guardian on 22 May 2008 be dismissed.
THAT orders 1 and 2 of the wife’s response filed 28 May 2008 be otherwise dismissed.
THAT orders 1, 2 and 3 of the Amended Response of Mr Porter be otherwise dismissed.
That order 1 of the Response of Mr Sarinsson filed 7 June 2007 be otherwise dismissed.
THAT the application of the Wife for final orders filed 21 August 2003 be otherwise adjourned to the further listing date of 8 August 2008 for mention and case management orders.
THAT the question of costs of the applicant and all respondents of and incidental to this interlocutory hearing be adjourned to the further listing date of 8 August 2008.
IT IS CERTIFIED
THAT pursuant to Rule 19.50 of the Family Law Rules this matter reasonably required the attendance of Senior Counsel and Counsel for all parties.
IT IS NOTED that publication of this judgment under the pseudonym Bergman & Bergman is approved pursuant to s121(9)(g) of the Family Law Act 1975 (Cth)
Table of Contents
INTRODUCTION
BACKGROUND FACTS
APPLICATION
RELEVANT FAMILY LAW RULES:
INTERLOCUTORY HEARING
MATERIAL RELIED UPON
SHAREHOLDERS AGREEMENT
AFFIDAVITS OF SOLICITOR – MR ROCKMAN
SUBMISSIONS
SUBMISSIONS OF THE CASE GUARDIAN
SUBMISSIONS OF THE WIFE
SUBMISSIONS OF THE SECOND AND THIRD RESPONDENTS
PORTER
SARINSSON
ACCRUED JURISDICTION
IS THERE A SINGLE JUSTICIABLE CONTROVERSY?
Earlier Reported Cases Where Accrued Jurisdiction Was Exercised
Warby & Warby
OVERVIEW OF WARBY FACTORS
EXERCISE OF DISCRETION
SECTIONS 90AE (1-4), 90AF AND 90AK
DECISION OF FULL COURT IN B PTY LTD AND ORS & K & K (2008) Fam CAFC 113
CURRENT INTERIM INJUNCTIVE ORDERS AND APPLICATIONS FOR COSTS
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLF 5245 of 2005
| MR BERGMAN |
Applicant
And
| MRS BERGMAN |
Respondent
And
| MR SARINSSON |
Potential Third party
And
| MR PORTER |
Potential Fourth party
REASONS FOR JUDGMENT
INTRODUCTION
This extended interlocutory hearing and judgment was required to determine whether the Family Court should permit the Case Guardian (who is the daughter of the Husband by his first marriage and who was appointed to act for the Husband by Orders of Registrar Marrone on 27 October 2005 with the consent of the Wife) to file an amended Form 1A application. The orders sought are pursuant to the courts accrued jurisdiction and ss90AE and 90AF and require the joining of each of Mr Porter (‘Porter), Mr Sarinsson (‘Sarinsson) and W Corporation to property proceedings between Mr Bergman (‘Husband’) and Mrs Bergman (‘Wife’) (collectively referred to in this judgment as the ‘joinder proceedings’). Various lengthy submissions were made on behalf of the Case Guardian and the Wife and the other persons affected together with further written supplementary submissions and responses. W Corporation was not separately represented as its current shareholders, and also Sarinsson, are all before the court and represented.
The facts and evidence before the court present this case as a highly complex property, financial, business valuation and commercial dispute (‘the commercial dispute’). The primary asset is a partially developed project (“the project”) in Fiji. The corporate entities associated with this project are incorporated and registered in the British Virgin Islands and in Fiji. The directors (as at the date of incorporation and currently) are residents of Australia. The Wife has had no corporate, financial or personal involvement in the project or the entities.
This hearing commenced before me as an interlocutory hearing on 23 October 2007 and at that time Mr St John of Senior Counsel appeared for the Case Guardian on behalf of the Husband (‘Case Guardian’). Mr Geddes of Queens Counsel appeared for the Wife and Ms Nikou of Senior Counsel then appeared for both Sarinsson and Porter. The hearing was adjourned to the next available court date in early January 2008 but that was unsuitable to one or more of Counsel and at their request, presumably on instructions, the matter was next to be listed on the 16 April 2008. By consent and for reasons known and agreed to by all parties the hearing could not proceed on that day and was adjourned to 12 May 2008. Again, and most unfortunately and for personal reasons the case could not continue to its conclusion on that date. Cronin J mentioned the matter before him that day and listed the two outstanding interim issues to be heard separately on 19 and 20 May 2008. Due to the unavailability of Counsel, the Wife was excused from attending on 19 May and therefore the interim hearing dealing with the release from the implied undertaking was by agreement heard before the resumption of the joinder matter. The complexity and length of hearing of the implied undertaking issue was greater than estimated by Counsel and consequently ran for the two days allocated therefore making it necessary to allocate a further date for the resumption of the joinder hearing and for submissions to be completed by the Wife, Sarinsson and Porter on this issue.
To complete the chronology of the interlocutory joinder hearing it resumed on a part heard basis before me on 18 June 2008 at which time certain specific undertakings, previously given by Porter to the court, were extended to the following day. On 19 June I heard detailed argument on the substance of the undertakings and their extension and I delivered an extempore judgment and made orders, in lieu of the undertakings, to be effective until 3 July 2008.
Upon the conclusion of the joinder hearing a timetable was established for further written submissions to be lodged by Porter and the Wife and for replies thereto to be delivered by the Case Guardian. The final written submissions were received by the court at 4.00 p.m. on 26 June 2008 and only thereafter have I been in a position to consider and evaluate the evidence and all legal issues and prepare and now deliver this judgment.
The Case Guardian proposed the joining of Porter, Sarinsson and W Corporation as additional parties to the Family Court matrimonial proceedings so that the whole of the commercial dispute, shareholder and valuation issues could be heard and determined and final orders made under the Family Law Act1975 (Cth) (“the Act”).
Both Porter and Sarinsson opposed their joinder and that of W Corporation to the Family Court proceedings. The Wife ultimately opposed the joining of Sarinsson and her final position communicated to the court by Ms Johns, appearing as Junior Counsel and without her leader, on the final day of hearing, was that she neither opposed nor consented to the joining of Porter and W Corporation.
The Case Guardian submitted that all of these affected persons are “necessary parties” under Rule 6.02 of the Family Law Rules 2004 (Cth) (‘the Rules’) and that an order should therefore be made by the court allowing the amendment sought to the Case Guardian’s Form 1A and permitting the joinder of all parties.
The Case Guardian submitted that there should be found to exist a single justiciable controversy which brought the commercial dispute within the jurisdiction of the Family Court and further that ss90AE and 90AF of the Act necessarily provided a statutory basis for the relief sought by the Case Guardian. That outcome was suggested to be ultimately aimed at securing a court order pursuant to which one or other of the respondents are required to purchase or acquire for a proper sum the Husband’s shareholding or commercial interests in W Corporation or otherwise that there be a sale of all of his shares and assets of W Corporation and with an appropriate distribution between shareholders. The Case Guardian further submitted that s90AE is applicable as it does provide an avenue and outcome not available in any other court within or outside of the Commonwealth of Australia and as such the acceptance of jurisdiction by the Family Court of Australia over the entirety of this commercial dispute should be found to be appropriate.
The Wife was ultimately silent upon the issue on whether there was, or was not, a single justiciable controversy. Her final position was to present no positive submission to the court on this issue or indeed upon application of the injunctive issues said to be available to the court by the Case Guardian. She did however firmly assert that Sarinsson, who is her brother, should not be joined as a party as he had sold or disposed of his shares and interest in W Corporation and had resigned as director. She submitted that this court could or should make no order affecting the interests of Sarinsson.
Sarinsson, who at the final stage of this extended hearing appeared in person for what he said were costs reasons, did not make any detailed submission upon the acceptance of accrued jurisdiction by the court or upon the proper or necessary use of its injunctive powers. He complained of his required attendance at court and the legal procedure by which the Case Guardian had nominated him as a respondent. He simply maintained that he had validly sold his shareholding in W Corporation to Porter for valuable consideration in a negotiated arrangement and now held no financial interest in or entitlement to the shares or assets of W Corporation. It is a common fact accepted by all that he had resigned as a director of W Corporation and the remaining directors are only Porter and the Husband. Sarinsson wanted only to be further heard on the issue of payment of his costs expended earlier in these proceedings and otherwise sought the dismissal of all joinder applications or other orders that affect him or commit him to any level of involvement or liability in these proceedings.
Porter submitted, through his Senior Counsel and his late filed but substantial affidavits and annexures thereto, that both he and W Corporation, in which he maintained that he was now the major shareholder with two thirds of the issued shareholding (having acquired for a negotiated cash payment or approximately $1.350 million the one third shareholding previously held by Sarinsson) should not be joined as parties in these Family Court proceedings. He impliedly supported the position and outcome argued by Sarinsson.
Porter further argued that Sarinsson, the Husband and himself had given proper and detailed instructions to their former commercial solicitor, Mr Raymond Rockman to prepare a Shareholders Agreement which was subsequently settled and then executed by all three of them and is dated 1 October 2002. Paragraph 5 of that agreement described the circumstances applicable to the issue of pre-emptive rights and the transfer of shares. Fundamental to the legal submissions of Porter was that both he and W Corporation should not be joined as parties in the Family Court proceedings and that the procedures provided for in the agreement have been ignored by both the Husband (initially) and now his Case Guardian. The primary argument of Porter is for this court to enforce the procedure provided for by the signatories to that agreement and thereby dismiss the joinder application.
This upholding of the shareholders agreement was before the court as the initial submission of Mr Geddes when he commenced his submission late on the first day of hearing of this interlocutory matter, 23 October 2007. Subsequently and for reasons that I still do not understand, the Wife’s support for this outcome was seemingly limited by the further submissions made on her behalf by junior Counsel.
Porter maintained at all times that he opposed any involvement in Family Court proceedings. His consistent primary submission was always that there existed a commercial dispute, first to be resolved in the manner prescribed in the shareholders agreement but otherwise pursuant to the laws of Victoria (paragraph 19 of the agreement) in a State Court of competent commercial jurisdiction. His Senior Counsel submitted that she was instructed to appear at all times under protest and I accept that Porter has not acquiesced to or accepted the exercise of jurisdiction of this court in this commercial dispute.
Ultimately and after the settlement or determination of any number of disputes (and which now from the affidavits and annexures include building, employment, payment or project disputes in Fiji), it may be that there is a single basic fact to be somewhere determined and that is the value (if any) of the Husband’s one third shareholding in W Corporation or any other right or entitlement that he might have in or to the net assets of that company. That summary however is a gross understatement of the issues and complexities in this commercial dispute. The principle asset is the property development project in Fiji, which is still under construction and is the subject of numerous and ongoing commercial disputes. The fact that W Corporation was incorporated in the British Virgin Islands together with other related facts and offshore commercial activities add a level of complexity to the identification and disclosure of corporate records, documents, financial statements and any potential corporate witnesses which may be required for any hearing.
The recently filed and substantial affidavits and annexures of the Case Guardian and the various responding documents filed by Porter identify that there are a myriad of allegations regarding, for example, unpaid and unexplained expenses and building and development activities. Finance has been urgently sought by Porter. There are concerns by Porter that unpaid subcontractors and workers in Fiji could soon act to sabotage the project or reclaim property to satisfy their outstanding financial claims. There have been earlier court proceedings both in the High Court of Fiji and in the Supreme Court and County Court in Melbourne on related interim disputes. The Family Court of Australia was not the first court venue selected. It is only the Case Guardian, on the instructions of the Husband, who submitted that this court was the appropriate venue for the proposed extended proceedings and after the husband had earlier elected to issue related proceedings in the County Court of Victoria. It is therefore within this extremely complex fabric of litigation and commercial disputes that a future determination of s79 proceedings between the Husband and Wife (and perhaps other parties) may eventually be prepared and made ready to be heard.
The Wife, for her part and save for her submissions to assist her brother, has no active involvement in these current interlocutory proceedings. She could politely be described as a bystander awaiting identification and quantification of the Husband’s financial interest in W Corpopration on the basis that that will be a (perhaps) substantial asset available in the property proceedings.
I have taken the opportunity at the outset of these reasons to briefly, and by way of outline only, conveniently summarise the overview of the commercial dispute and the positioning of the parties and those to be joined. What I now evaluate is the background factual history and lengthy applications and submissions before the court and possible orders but all of this is in the context that, on the particular relevant facts of this case and given the reasons I have provided below, I find that it is over-simplistic and inaccurate to identify a factual matrix from which a single justiciable controversy could be said to arise.
BACKGROUND FACTS
In my earlier judgment delivered 30 May 2008 I set out relevant background facts in paragraphs 14-26 (inclusive) and as they are fundamental to a proper identification and understanding of the issues now before me in this further and related interlocutory dispute. I incorporate those paragraphs hereunder in this judgment;
14.It is necessary to provide some further background to this complex web of legal argument and commercial issues that have been litigated in courts in Fiji and in Melbourne, in both the Supreme Court and the County Court and of course continuing in this court.
15.From my reading of all affidavits filed in this matter and by way of previous hearings and extempore judgments, and in brief summary only, the Husband and [Sarinsson], and thereafter [Porter], were involved in a commercial acquisition and development of a real estate and tourism development resort [at W], a freehold title of approximately 27 acres located […].
16.On 1 October 2002, each of the three then partners executed a shareholders agreement which had been prepared by Melbourne solicitors, Rockman and Rockman, and that document is exhibit ‘KMJ1’ to the affidavit of the Case Guardian filed 20 April 2007 (document 193 in the court index). Pursuant to that agreement [Sarinsson] and [the husband] were each allocated 16,667 bearer shares, and [Porter] 16,666 - a total issue of 50,000 shares.
17.There are two companies that have been documented to the court: [W] Ltd, a company incorporated in April 2003 with a change of name effected in November of 2003 in Fiji; and [W Corporation], a company incorporated in the British Virgin Islands. Initially, each of the three primary individuals held shares and were directors of that company.
18.[Porter] was appointed the project manager of the [W] development and there remains a substantial and ongoing dispute as to corporate, commercial and financial issues including his claim that the whole of the development and its end value had initially been overestimated by the Husband and/or [Sarinsson]. There are other continuing disputes as to the initial available planning permits and other approvals, the costs of particular aspects of the development including the access [route] to [W property] and overall financial and payment concerns. I do not intend this summary of disputes to be inclusive of each and every allegation, but merely to set the commercial flavour to the substantial disputes and conflict between all parties.
19.After the execution of the shareholders agreement all parties were required to make various financial contributions to the [W] project, and there were complaints and issues then raised as to the contributions themselves, as to the taking of accounts, and as to an audit of the financial records of [W Corporation]. In particular, it appears that the Husband would allege the company has been managed improperly and he seeks appropriate financial adjustments which are beyond the intent of this judgment.
20.What is important to understand in this background is that late December 2004 there were proceedings brought by [Sarinsson] in the High Court of Fiji for the winding up of [W Corporation]. Subsequently in March 2005 the Husband, [Porter] and [W Corporation] instituted proceedings in the Supreme Court of Victoria against [Sarinsson] for his failure to contribute to proper cash calls made of him. Both of these proceedings were ultimately discontinued subject to negotiated agreements.
21.[In] June 2006 the Husband commenced proceedings in the County Court of Victoria against [W Corporation], seeking strict enforcement and compliance with clause 14.1 of the shareholders agreement. Those proceedings were subsequently compromised by a consent order of Judge Anderson dated […] September 2007 and that document is an exhibit in these proceedings. An earlier exhibit in these proceedings was a prior case management order of the County Court in June of last year, and it does now seem to be the agreed position that the final County Court order was also an exhibit, tendered on behalf of the Wife, in earlier interlocutory proceedings before me.
22.In any event, the importance of this background is to highlight that the Husband did elect to institute proceedings in the County Court, no doubt it being then advised to him and accepted by him as the appropriate Victorian commercial court to seek the enforcement of the shareholders agreement particularly having regard to the fact that the law applicable to that agreement was stated to be the Law of Victoria. It was in those proceedings that various documents were then produced to the court. It is the production of those documents that was the subject of those final orders of […] September 2007.
23.Pursuant to those orders [W Corporation] was to produce to the Husband corporate and financial documents as identified in subparagraphs (a) and (b) of order 1 thereof, save for the documents exempted by agreement and thereafter identified in subparagraphs (i) and (ii) thereof. Those subparagraphs included the documents that were produced pursuant to a subpoena addressed to [Porter] in this court but subsequently delivered by his solicitor Lewin on 16 December 2005, and additionally a lever arch binder of documents that was said to be provided to the Husband’s Senior Counsel by solicitors for [W] or [Porter].
24.It is impossible to fully understand the number and identity of documents that have been produced to the County Court. By and large they have not been catalogued. They have been inspected and copied, certainly by the solicitors for the Husband. I am unsure if other solicitors have so involved themselves. What is clear is that they are or were documents known to and available to [Porter], which he at some time provided to his solicitors, Mills Oakley, and they in turn delivered up to this court, and/or produced pursuant to the consent order of the County Court. I do not accept any submissions that the restrictions on the production of documents in (i) and (ii) of the County Court Order are binding upon me. They were all independently produced to this court.
25.There was one other significant proceeding commenced on 13 September 2006 in the County Court of Victoria by [Porter] against the Husband pursuant to section 52 of the Supreme Court Act, claiming an amount that the Husband was allegedly liable to contribute in respect of solicitors' fees and outgoings in opposing the Fijian High Court winding up action. That matter was ultimately resolved, on or about […] December 2006, and a deed of settlement was executed.
26.As I now understand the facts, and as Mr St John SC detailed them to the court in response to my question, there are no other current and relevant proceedings in Australia or Fiji as between the Husband, [W Corporation], [Porter] and/or [Sarinsson]. There are perhaps somewhat related proceedings in the Victorian Supreme Court which have now been transferred to the County Court for hearing in July 2008 and involving an action between the Husband, the Wife and her sister in relation to loan agreements. Additionally there have been other court proceedings in Fiji between companies allegedly associated with [Porter] and against [W Corporation] but the submission of Mr St John SC was that they were not of any relevance for the purpose of this disclosure and use of subpoena issue and there was no other contrary submission of Ms Nikou SC in that regard.
I highlight therefore that the Case Guardian, or previously the Husband, and other potential parties have selectively issued related proceedings in other Courts as a matter of choice and convenience. The Family Court was not the primary venue of choice by the Husband. It was more likely a court of personal convenience or alternate choice to him and the Case Guardian.
APPLICATION
The outstanding order sought in the application of the Case Guardian with which this judgment is concerned (document 210 in the court index) is:
“1. That the Husband be granted leave to file and serve an Amended Form 1A Response in the terms of the draft From 1A Response annexed hereto”
For completeness I set out the orders sought in his attached and amended Form 1A which he would ask the Court, in its accrued jurisdiction, to hereafter hear and determine:
(1)That, pursuant to part VIIIAA of the Family Law Act 1975 and/or in the exercise of the accrued jurisdiction of this honourable Court, the second respondent and the third respondent join with the first respondent/Husband to sign all such documents and do all such acts and things as may be required to:
(a)sell the shares held by each of them in [W Corporation] upon such terms and conditions as may be ordered by this Honourable Court and to divide the proceeds of sale between them in equal shares after adjustment upon the taking of accounts;
(b)alternatively, sell the assets of [W Corporation] upon such terms and conditions as may be ordered by this Honourable Court and to divide the proceeds of sale between them in equal shares after adjustment upon the taking of accounts
(2)Alternatively, that the second respondent and the third respondent each acquire one half of the shares held by the first respondent/Husband for such amount and otherwise upon such terms and conditions as may be ordered by this Honourable Court
(3)That the Husband be excused from further particularising the Orders he seeks until such time as updated valuations of the assets of the parties have been obtained
(4)Such further other orders as this Honourable Court deems appropriate”
This intended future application highlights the ongoing nature and ambit of the commercial dispute and reinforces the required sale or purchase of the shares or assets of W Corporation as being the fundamental commercial resolution of the dispute between the parties to this interlocutory application other than the wife.
Subsequently the Case Guardian filed a further Application in a Case on 22 May 2008 (document 246 in the court index) for the purposes of these proceedings seeking amongst other substantial interlocutory and interim orders the following:
“1. That each of [Porter], [Sarinsson] and [W Corporation] be joined as parties in these proceedings”
The Wife and other respondents named in the proceedings have filed various responses to these applications and orders seeking that they be dismissed.
RELEVANT FAMILY LAW RULES:
Rule 6.03 of the Family Law Rules 2004 (‘the Rules’) provides that a party may be added to the application by naming them on the application or response and serving them.
RULE 6.03
Adding a party
(1)A party may include another person as a respondent by naming the person in the application.
(2)A party may add another party after a case has started by:
(a)amending the application or response, as the case may be, to add the name of the person; and
(b)by serving on the new party a copy of the application or response, and any other relevant document filed in the case.
Note 1 For amendment of an application, see Division 11.2.2.
Note 2 If a Form is amended after the first court date, the Registry Manager will set a date for a further procedural hearing (see subrule 11.10 (3)).
Note 3 A reference to "application" includes a reference to "cross-application (see the dictionary).
It is accepted by all Counsel that the proceedings in this case have progressed too far for any addition of a party to be achieved in this simplistic manner. Regard must therefore be had to Rule 11.10 which provides that a party may amend their application and the circumstances in which this can be done:
RULE 11.10
Amendment by a party or court order
(1)A party who has filed an application or response may amend the application or response:
(a)for a case started by an Application for Final Orders:
(i)within 28 days after the final resolution event; or
(ii)at any later time, with the consent of the other parties or by order;
Here, as both the application and the response sought final orders, Rule 11.10(1)(a) is applicable and stipulates that one of two conditions must be met for the amendment to be valid. The first is that the amendment occurs within 28 days after the final resolution event, which is determined in property proceedings to be the Financial Conciliation Conference. This Conference in these proceedings occurred on 24 June 2004 and therefore the 28 day period has clearly long elapsed. The second form of amendment is by consent of the parties or by order of the court. Here consent of the named respondents is clearly not forthcoming and therefore the only way that one or all of them may be added is by an order of the court. That is essentially what this application and interlocutory hearing concerns.
The judgment of Morgan J in K & K [2005] FamCA 997; (2005) FLC 93-237; (2006) 34 Fam LR 266 is authority for the position that an application to amend is decided on principles analogous to those of summary dismissal. Her Honour stated that:
“It was submitted for the Wife, correctly, that the matters for the Court to consider in deciding whether to permit an amendment are similar to those pertaining to applications to summarily dismiss proceedings. In Lindon v The Commonwealth (No2) ((1996) 70 ALJR 541 at p. 55) Dawson J. said that an opinion of the Court that a case was weak and unlikely to succeed was not, alone, sufficient to warrant termination. He went on to refer to a "guiding principle" of doing what is just. If the pleading under scrutiny was "doomed to fail" the Court should dismiss the action.
The Full Court of the Family Court considered this issue in Pelerman ((2000) FLC 93-037) and set out the principles to be applied as follows:
(a)The power for summary dismissal is a discretionary one.
(b)Relief “is rarely and sparingly provided”.
(c)The parties seeking summary dismissal must show that the application is “doomed to fail” or as has been otherwise described that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious.
(d)A weak case or one that is unlikely to succeed is not sufficient to warrant termination.
(e)“If there is a serious legal question to be determined, it should ordinarily be determined at a trial.''
(f)“If notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a Court will ordinarily allow that party to reframe its pleadings.''
The question I must determine is whether the Wife’s application is "doomed to fail" or “obviously futile” as was contended by the respondents. These are the terms with which the authorities resonate. If the Wife can satisfy me that she has an arguable case then she should be allowed to amend. I am not required to determine the merits of her claim. The question of whether her claim should succeed is a matter for the trial judge. Abela v Giew ((1964) 81 WN (PT1) NSW 344 at p. 345) per Taylor J citing Commissioner for Railways v Bielewicz (1963 80 WN (NSW) 790). As Jordan CJ said in Horton V Jones (No.2) (op cit)
“A judge determining an application such as this is not concerned with the merits of the claim sought to be litigated.”
The further submission of the Case Guardian was that when the respondents were named in the amended response they were effectively joined, as the court cannot properly refuse to allow the Form 1A to be amended as sought, and that the onus was or should then be upon each of them to persuade the Court, pursuant to Rule 6.04, that they should be removed as parties. Mr St John first highlighted Rule 6.02 which provides:
RULE 6.02 (Excluding parenting issues)
Necessary parties
(1)A person whose rights may be directly affected by an issue in a case, and whose participation as a party is necessary for the court to determine all issues in dispute in the case, must be included as a party to the case.
Example
If a party seeks an order of a kind mentioned in section 90AE or 90AF of the Act, a third party who will be bound by the order must be joined as a respondent to the case
…
Note The court may dispense with compliance with a rule (see rule 1.12).
RULE 6.04
Removing a party
A party may apply to be removed as a party to a case.
Note Rule 5.01 sets out the procedure for making an Application in a Case.
The example provided in the Rule 6.04 may be of particular relevance in these proceedings and is a matter upon which I asked all Counsel in this interlocutory proceeding to make further brief written submissions.
I do not accept the Case Guardian’s final submission that the question of leave to file the amended application should be decided without reference to whether accrued jurisdiction or the remedies sought by that amended application are available to this Court. Morgan J observed that the principles to be applied in deciding whether or not to grant leave to amend in these circumstances are analogous to those for deciding summary dismissal claims. It is however necessary to have properly identified before the court the relevant facts supporting the cause of action. Regard must be had to the facts in these proceedings to establish if there is a single justiciable controversy for the purpose of attracting accrued jurisdiction in this Court. To this extent Rule 6.02 serves as an additional incentive to permit the amending of applications to join the persons necessary for properly determining the dispute and to enable the granting of appropriate orders sought, but does not in itself provide justification for allowing an application to be made and determined, if it is outside of the court’s jurisdiction.
In the exercise of my discretion and to do what is just I would not permit the Case Guardian to amend her Form 1A response pursuant to Rule 11.10. I decline to pronounce any such order pursuant to sub-paragraph 1(a)(ii) thereof for all of the detailed and considered reasons given in this judgment.
I furthermore identify and rely upon Rule 1.12 which provides:
RULE 1.12
Court may dispense with Rules
(1)These Rules apply unless the court, on application or its own initiative, orders otherwise.
(2)The court may dispense with compliance with any of these Rules at any time, before or after the occasion for compliance arises.
(3)In considering whether to make an order under this rule, the court may consider:
(a)the main purpose of these Rules (see rule 1.04);
(b)the administration of justice;
(c)whether the application has been promptly made;
(d)whether non-compliance was intentional; and
(e)the effect that granting relief would have on each party and parties to other cases in the court.
I dispense with the requirement to comply with the Rules so far as they conflict with the method which I have adopted in deciding this complex interlocutory application. To the extent contemplated by the Note to Rule 6.02 I specifically dispense with any required compliance. I have primary regard to what is just and proper, the administration of justice and the main purpose of the Rules. I have examined the merits of this hearing in the context of the complex facts and legal history. I proceed on the basis of determining the applicability of the accrued jurisdiction of the Court upon the facts now before me, together with the available statutory provisions of the Act and the decided case law.
Both for completeness and clarification I set out hereunder the material presented to the Court and relied upon, which I have carefully read and evaluated.
INTERLOCUTORY HEARING
I highlight that I am now hearing interlocutory proceedings and for this purpose I have read all of the affidavits and annexures relied upon and I have listened carefully to and evaluated the lengthy legal submissions received both in writing and orally. There has been no oral evidence or cross examination of witnesses. I have previously delivered numerous ex tempore judgments on interim and case management issues leading up to the hearing of this interlocutory joinder application. I have made required findings of fact only where necessary and when proven to the required level in interlocutory proceedings. I have endeavoured to act prudently and with a level of care not to, in any way whatsoever, exclude the future testing of evidence by cross examination in this continuing and seemingly never ending litigation. To the extent that it may be argued that I have not considered material relevant to this application I draw attention to Rule 5.10 which provides that hearing of an interim application should be no longer than two hours. I have of necessity allowed the parties in this case much more time than is ordinarily contemplated in these matters and taken into account the large volume of documents sought to be relied upon, without unduly limiting them as to timetable or content.
MATERIAL RELIED UPON
For completeness I have set out hereunder each of the applications or responses relied upon together with the various affidavits and written submissions received from Counsel. Within many of the affidavits there are substantial annexures and I have read, considered and evaluated all relevant evidence and submissions in determining my interlocutory orders.
The documents relied upon by the Case Guardian for the purpose of these proceedings were:
· Document 193 - Affidavit of Case Guardian - Filed 20/4/07;
· Document 194 - Application in a Case - Filed 20/4/07;
· Document 205 - Affidavit of Case Guardian - Filed 7/6/07;
· Document 210 - Amended Application in a Case - Filed 11/7/07;
· Document 211 - Affidavit of Case Guardian - Filed 11/07/07;
· Document 215 - Affidavit of Case Guardian - Filed 11/09/07;
· Document 216 - Summary of Argument of Case Guardian - Filed 5/10/07;
· Document 217 - Affidavit of Case Guardian – Filed 16/10/07;
· Document 226 - Affidavit of Case Guardian - Filed 23/10/07;
· Document 245 - Affidavit of Case Guardian - Filed; 20/5/08
· Document 246 - Further Application in a Case - Filed 22/5/08;
· Document 253 - Affidavit of Sarah Vorwerg - Filed 28/5/08;
· Document 256 - Affidavit of Dr R - Filed 28/5/08;
· Document 258 - Supplementary Submissions of the Case Guardian - Filed 18/6/08;
· Document 260 - Final Responding Submissions of the Case Guardian - Filed 25/6/08.
The documents relied upon by the Wife for the purpose of these proceedings were:
· Document 203 - Affidavit of Wife - Filed 28/05/07;
· Document 204 - Response to an Application in Case (Wife) - Filed 25/5/08;
· Document 219 - Affidavit of Wife - Filed 18/10/07;
· Document 227 - Summary of Argument (Wife) - Filed 23/10/07;
· Document 251 - Response to an Application in Case (Wife) - Filed 28/05/08;
· Document 252 - Affidavit of Wife - Filed 28/05/08; and
· Document 261 - Further Submissions (Wife) - Filed 25/6/08.
The documents relied upon by Sarinsson for the purpose of these proceedings were:
· Document 207 - Response to the Application in a Case - Filed 07/06/07;
· Document 208 - Affidavit of Sarinsson - Filed 7/06/07;
· Document 213 - Affidavit of R. Rockman - Filed 1/08/07;
· Document 218 - Affidavit of R. Rockman - Filed 18/10/07; and
· Document 220 - Summary of Argument for Respondents - Filed 22/10/07 (at a time when he was then represented).
The documents relied upon by Porter were:
· Document 209 - Affidavit of Porter - Filed 12/06/07;
· Document 213 - Affidavit of R. Rockman - Filed 01/08/07;
· Document 218 - Affidavit of R. Rockman - Filed 18/10/07;
· Document 220 - Summary of Argument of Respondents - Filed 22/10/07;
· Document 244 - Affidavit of Porter - Filed 20/05/08;
· Document 255 - Affidavit of Porter - Filed 29/05/08;
· Document 258 - Affidavit of Porter - Filed 18/06/08; and
· Document 259 – Amended Response to an Application in Case (Porter) – Filed 28/6/08;
· Document 262 - Further Submissions on behalf of Porter - Filed 26/06/08.
SHAREHOLDERS AGREEMENT
I accept so far as necessary for these proceedings that the shareholders Agreement dated 1 October 2002 was intended to be a valid and properly executed Agreement entered into by each of the three original shareholders of W Corporation with full knowledge and consent.
The Husband, Porter and Sarinsson covenanted in the Agreement that its provisions were to be enforceable by or against each of them (clause 1.3) and each of them were (clause 1.6) to act promptly, reasonably and in good faith to observe the provisions of the Agreement. Under that contractual agreement the shareholders agreed to a step by step mechanism to the sale, purchase or transfer of their shares. The Husband, by his Case Guardian, has not adopted or followed that approach. He would ultimately have this Court, as part of the s79 property proceedings, hear and determine all questions of and associated with valuation and the transfer on sale of his 16,667 bearer shares in W Corporation.
The Shareholders Agreement is an annexure to the Case Guardian’s affidavit of 20 April 2007 (document 193 in the Court Index) and I have read the whole of the document and set out in full the more relevant clauses.
“1. General Provisions
1.1 The Shareholders and the Company enter into their respective undertakings and agreements contained in this Deed in consideration of the efficient and orderly conduct and management of the Company in the interests of the Company and the shareholders
1.2 The shareholders jointly and severally covenant that during the continuance of this Deed each of them will abide by the provisions of this Deed and will exercise their rights and powers as shareholders and whilst acting as an officer of the Company in accordance with the provisions of this Deed.
1.3 Each of the shareholders covenants that the provisions of this Deed shall be enforceable by or against each of them by or against any of the other shareholders.
1.4 Each of the shareholders shall act, and execute such further instruments, consents and make such decisions and vote on resolutions at meetings of the company so as to give full effect to the provisions of this Deed.
1.5 Where some conduct required under this Deed might conflict with the provisions of the Company’s Articles of Association the shareholders agree to provide the required consent to waive that provision (if that is allowed by law) and will co-operate to take the necessary action as shareholders of the Company to alter the Articles of Association to permit the conduct by the Company in accordance with this Deed
1.6 Each of the shareholders agrees to act promptly reasonably and in good faith whilst taking action or undertaking conduct in order to observe the provisions of this Deed.…
…
5 Pre-emptive Rights and Transfer of Shares
5.1 Where –
5.1.1 All the members of the Company specifically agree; or
5.1.2 The Pre-emptive procedure in 5.2 is followed; or
5.1.3 A permitted transfer is made under 5.3
The directors shall register any transfer of fully paid shares which complied with the requirements of the Company’s Articles of Association. In any other circumstances, the directors may, in their discretion, decline to register a transfer of shares without being bound to assign any reason for such refusal
5.2 The pre-emptive procedure is as follows
5.2.1 The persons proposing the transfer any shares (“the proposed transferor”) shall give notice in writing to the Company (“a transfer notice”) that he desires to transfer the shares
5.2.2 The transfer notice shall specify the sum he fixes as the fair value and shall constitute the Company his agent for the sale of the shares at their fair value. Within seven (7) days of receipt of a transfer notice, the Company shall forward a copy thereof to all shareholders and unless within fourteen (14) days of the date upon which the copy is so forwarded any shareholder requires a valuation to be made, the sum specified in the transfer notice as the fair value shall, for the purposes of this provisions, be deemed to be the fair value of the shares comprised in the transfer notice. If any shareholder so required a valuation to be made, the directors shall procure that the fair value is determined by a valuer appointed by, as determined by the directors, either the President for the time being or the Institute of Chartered Accountants in Australia or of the Australian Society of Certified Practising Accountants or of any successor to either or both of those bodies, which valuer shall be deemed to be acting as an expert and not as an arbitrator. The valuer shall certify in writing under his hand a fair value of the shares comprised in the transfer notice as between a willing but not anxious vendor and a willing but not anxious purchaser.
5.2.3 Upon the expiration of the said period of fourteen (14) days or, if a valuer is appointed, upon the valuer determining the fair value as aforesaid, the Company shall forthwith offer the shares comprised in the transfer notice in the first instance to the existing shareholders (other than the proposed transferor) in proportion to their shareholding, which offer shall remain open for acceptance in writing for a period of seven (7) days from the date of the offer
5.2.4 If any shareholder does not so accept the offer to purchase his proportion of the shares, the number of shares not taken up shall then be offered to those shareholders who are willing to purchase the same and if more than one in equal shares and such further offer shall remain open for acceptance in writing for a further period of seven (7) days
5.2.5 Any shares not so taken up may then be offered by the directors to any person selected by the directors as being one whom it is desirable to admit to membership.
5.2.6 A transfer notice may include several parcels of shares and in such case shall operate as if it were a separate transfer notice in respect of each parcel
5.2.7 A transfer notice shall not be revocable except with the sanction of the directors
5.2.8 If the directors, within twenty-eight (28) days of the date of the offer referred to in paragraph 5.2.3 find a shareholder or person (“the purchaser”) as aforesaid willing to purchase the shares and give notice to the proposed transferor, he shall be bound, upon payment of the fair value, to transfer the shares to the purchaser.
5.2.9 If the proposed transferor, after having become so bound, makes default in transferring the shares or any of them the Company may receive the purchase money and shall thereupon execute a transfer of the shares and subject to such transfer being, if required by law, duly stamped, cause the name of the purchaser to be entered in the Register as the holder of the shares and shall hold the purchase money in trust for the proposed transferor, The receipt of the Company for the purchase monies shall be a good discharge to the purchaser and after his name has been entered in the Register in purported exercise of the power given by this paragraph, the validity of the above procedures shall not be questioned by any person.
5.2.10 If the Company, within twenty-eight (28) days of the date of the offer referred to in paragraph 5.2.3 fails to give notice as provided in paragraph 5.2.8 the proposed transferor at any time within sixty (6) days after the date of the offer referred to in paragraph 5.2.3 shall be at liberty to sell and transfer the shares (or those not so transferred) to any person and at any price
5.3 A permitted transfer is a transfer by a member or the legal personal representative of a deceased member to any other member or to any child or remoter issue son-in-law, daughter-in-law, father, mother, brother, sister, nephew, niece, Wife, Husband, widow or widower of a member or deceased member; and a transfer of shares standing in the name of the trustee of a will of any deceased member consequent upon any change of the trustees.
…
8 Loans
8.1 Each Shareholder shall from time to time as required by the Company advance by way of loans to the Company one third of the Company’s requirements for its business such loans to be on terms and conditions nominated by the Board of Directors.
…
14 Information to shareholders
14.1 The Company will keep each of the shareholder fully informed regarding its business and financial affairs; and
14.1.1 provide prompt and adequate particular of any intended future transaction or matter in response to written enquiries made by any of the shareholders; and
14.1.2 will provide regular financial statements to each of the shareholders showing the Company’s debtors creditors and cash flow in a form acceptable to the Company’s Accountants within thirty (30) days of the end of each financial year
…
19 operative Law
19.1 This Agreement is governed by the laws of Victoria and the parties submit to the non-exclusive jurisdiction of the laws of Victoria.”
AFFIDAVITS OF SOLICITOR – MR ROCKMAN
Raymond Rockman (‘Rockman’) was the solicitor acting for Sarinsson and I have carefully read each of his affidavits and their annexures filed 1 August 2007 and 18 October 2007. He was engaged initially as the solicitor on the record representing Sarinsson but his presence was objected to on behalf of the Case Guardian and, under a level of protest, he withdrew from these proceedings to minimise costs and the number of preliminary disputes.
Rockman was jointly engaged by the Husband, Sarinsson and Porter to draw the Sale of Share Agreement and the Shareholders Agreement in or about October 2002 and at a time when the Husband and Sarinsson had agreed to sell down their then 50% shareholding in W Corporation in favour of Porter – so that each of the then three directors would hold a one third shareholding in W Corporation.
To the extent that there are differences (if any) that are in conflict with or remain unexplained as between the Heads of Agreement (an Exhibit to the Winding Up Application that was issued by Sarinsson in the High Court of Fiji proceedings in 2004) and the Shareholders Agreement. I do not find that there are or should be any issues of such relevance or significance that would preclude me from deciding the interlocutory issues now before this Court.
I have carefully balanced the evidence of the Case Guardian in her affidavit sworn 11 September 2007 against the affidavits in response of Rockman and his annexures thereto. Subject to any future and specific cross examination of Rockman or other witnesses and for the purposes of this interlocutory hearing, I certainly prefer and would accept the explanations and evidence given by Rockman.
I further accept for the specific purpose of this interlocutory judgment (but with the qualification of leaving open any finding that may be properly made after a defended hearing and cross examination of witnesses) the professional opinion of Rockman, an experienced commercial solicitor, contained in sub paragraph 6.3 of his first affidavit where he states that:
“Whilst I note that the Husband’s solicitors are making an issue over the interpretation of clause 5 of the shareholders agreement, I view their concerns as being without foundation and being based on their misreading of the clause. The clause is clear, unambiguous and is the type of pre-emptive clause that is common in Company Constitutions. In this regard I note that the pre-emptive provisions of [W] Ltd, a company established in Fiji by the parties after they had taken control of [W] Corporation are substantially the same in relation to transfers between the members as the pre-emptive provisions in clause 5 of the Shareholders Agreement.”
On the basis of the current affidavit evidence of Rockman, and the supporting documents and the evidence of Porter and Sarinsson I reject in this interlocutory hearing any issue, concern or position that otherwise might be adopted by the Case Guardian on behalf of the Husband as to Sarinsson’s exit as a shareholder and director of both overseas incorporated companies. I conclude that this qualified interlocutory finding is open and appropriate on the evidence now before me, but in any event I have concluded on all of the facts and evidence in this case that there is no single justiciable controversy and on that basis I am not persuaded to apply any accrued jurisdiction or make any other extended orders. I would not join Sarinsson as a party in these substantial proceedings.
Before going on to more clearly examine the evidence and submissions made by each party in relation to this interlocutory issue it is of particular relevance to understand the continuing and current disputes between the Husband and Porter which have been the subject of the further filing of affidavits by them and a further Application in a Case filed on behalf of the Case Guardian on 22 May 2008 (document 246 in the Court index). These documents filed in the court demonstrate an added layer of real complexity to the dispute between the Husband, Porter and W Corporation regarding work and labour done, or purported to have been done in Fiji, with local contractors or workers. This would necessitate evidence from that jurisdiction to be available to properly determine those issues in dispute. Porter voluntarily gave an undertaking to the Court in May and was then injuncted to maintain that undertaking by an order of this Court on 19 June 2008 to last until 3 July 2008 which was then further extended by consent to the 8 August 2008. However I have been told, and no doubt will be told in more detail on 8 August 2008 when this matter is to return before me, that there is some urgency on behalf of Porter and W Corporation that monies be released to him for the purpose of paying local people and sub-contractors in Fiji for work and labour properly done and other capital expenditure of W Corporation.
SUBMISSIONS
On the first hearing day Senior Counsel for the Case Guardian submitted that Porter and Sarinsson ought to be joined to the s79 proceedings. He concluded those oral submissions at around 4.00 p.m. that day at which time Mr Geddes QC commenced his submissions. At around 4:35 p.m. the matter was adjourned part heard to a later date. For reasons earlier explained herein the hearing resumed on 18 June 2008 with submissions made on behalf of the Wife, Sarinsson and Porter and thereafter responses.
Given the elapsed time and a series of factual and financial events which allegedly occurred it was considered necessary by the Case Guardian for the further lodgement of applications seeking injunctions against Porter, Sarinsson and W Corporation. The Case Guardian forwarded to my Chambers on the 17 June 2008, the day before this part heard matter resumed, further “supplementary submissions” totalling 21 pages in length. I permitted Mr St John to first re-address the Court to highlight his further and extended submissions and orders now sought.
Due to the relative length and complexity of argument and the change in each party’s position in regards to this application. I now consider it appropriate that I summarise their submissions. This I have done in a very general overview given the length of the written submission(s) received and the many hours in oral submissions. I nevertheless have read and evaluated all affidavits and submissions.
SUBMISSIONS OF THE CASE GUARDIAN
The Case Guardian sought that Sarinsson, Porter and W Corporation be added as parties to these proceedings. Very much the kernel of the argument was that there was a single justiciable controversy and therefore the Family Court was the proper venue, notwithstanding the husband’s past and informed election to institute related court proceedings elsewhere.
It was argued that it was necessary that all of these parties be joined to the proceedings in order to finally determine the property proceedings between the Husband and the Wife. It is submitted that, in practical terms, it was “impossible for the Family Court proceedings to proceed to final hearing where the value of the Husband’s interest in [W Corporation] is unable to be determined”.[1]
[1] Summary of Argument of Case Guardian Filed 5 October 2007 at Page 5.
The Case Guardian maintained that the Husband’s interest in W Corporation was unable to be determined due to various actions of the named respondents in their capacity as directors of W Corporation. The allegations made in this regard are numerous and include (directly from the documents):
a)[W Corporation] and [W] development is being conducted by the other shareholders without regard to his interests or proper corporate governance of [W Corporation];
b)Notwithstanding his position as a director and shareholder of [W Corporation], the Husband has been improperly refused access to the documents and records of [W Corporation]. Documents ahave [sic] been removed by [Porter] and/or [Sarinsson];
c)Funds of [W Corporation] may have been used in an unauthorized and improper fashion to fund another development [in] Fiji which is associated with [Sarinsson] and [Porter] but not with [W Corporation] or himself;
d)Payment of invoices purportedly relating to work done on the [W] development has been authorised by [Porter] and/or [Sarinsson] when, in fact, no such work has been done;
e)[Porter] has forged the Husband’s signature for the purpose of obtaining payment of very substantial management fees [Porter] alleges were owed to him by [W Corporation]. Payment was not properly authorised nor the alleged management fees evidenced;
f)[Porter], (the director who has largely arrogated to himself de facto control of [W Corporation] and its records) in response to requests by the Husband to have the accounts of [W Corporation] audited, has stated that he “would rather burn the company records than have them audited” (or words to like effect);
g)[Sarinsson] has previously instituted proceedings in Fiji seeking to wind up [W Corporation] on the ground there is no longer a relationship of trust and confidence between the shareholders. These proceedings were subsequently discontinued by [Sarinsson] but issues relating to those proceedings, especially a substantial claim for legal costs is reported to have been compromised with [Sarinsson] by [Porter] on behalf of [W Corporation]. Such compromise was against the interests of [W Corporation] and was unauthorised by [W Corporation] or the Husband.
h)Proceedings in the County Court of Victoria brought by the Husband, for the production of [W Corporation] documents were compromised on or about 4 September, 2007 upon the basis that the documents sought by the Husband would be made available to him but the agreement has not been honoured and no documents have yet been produced”
Subsequent affidavit’s and Applications in a Case filed by the Case Guardian further sought that Porter, Sarinsson and now W Corporation to be joined to these proceedings on the basis of further particularised allegations - save for (b), (c) and (e) above which are substantially the same in the later application - including that they:
a)Improperly excluded the Husband from the management of [W Corporation];
b)Denied the Husband access to information about the affairs and operations of [W Corporation];
c)Diverted [W Corporation’s] funds and assets to another property development [in] Fiji, in which [Porter] has an interest;
d)Booked personal expenses (including legal fees) to [W Corporation] as legitimate expenses of [W Corporation];
e)Forged the Husband’s signature on a letter from [W Corporation] dated 21 February 2005 purporting to authorise payment of funds by [W Corporation] to [Porter] on account of management fees;
f)Purported to award himself or companies associated with him, including [N] Ltd and [W] Ltd, unreasonable and exorbitant management fees;
g)Manipulated the loan accounts of [W Corporation] so as to maximise the amount supposedly owed by [W Corporation] to [Porter] and [Sarinsson] and minimise the amount owed by [W Corporation] to the Husband”
Many of the complaints and alleged breaches of corporate, legal and personal responsibilities overlap. It is apparent from the supplementary submissions that the admissible evidence to be evaluated and the determinations required in order to ascertain the value (if any) of the Husband’s shareholding in W Corporation are complex and numerous.
In the Case Guardian’s first submissions filed and argued before the Court in October 2007 reliance was placed upon the power of the Court under ss90AE and 90AF of the Act to make the orders contemplated and further the availability of accrued jurisdiction to enable the Family Court to determine the “Husband’s claims against the other shareholder’s and/or [W Corporation] pursuant (inter alia) to the Shareholders’ Agreement”. The Case Guardian then filed supplementary submissions dealing with how this interlocutory issue ought to be determined as a matter of procedure only by allowing the amendment to the response as sought and therefore the joining of Porter, Sarinsson and W Corporation. For reasons previously given I do not agree.
It was further submitted that, to the extent that the application of the Case Guardian sought orders pursuant to ss90AE and 90AF of the Act, granting leave to amend “cannot properly be refused”.[2] In support of this submission Mr St John submitted that the relief sought against all of the proposed respondents is within the jurisdiction of the court and “is manifestly not frivolous and if granted would clearly affect the rights of the named persons”.[3] I do not agree
[2] Case Guardians Supplementary Submissions Filed 17 June 2008 at Paragraph 5.
[3] Ibid.
Finally the Case Guardian submitted that the commercial dispute “is properly incidental to the dispute between the Husband and Wife”.[4] Again I find that I am against this submission.
[4] Supplementary Submissions of the Case Guardian Filed 17 June 2008 at Page 2.
The Case Guardian further relied upon authorities, which I have hereafter considered, in support of the proposition that accrued jurisdiction is available on these facts, asserting there is a single justiciable controversy and that, if there is a discretion left with the trial judge as to whether such jurisdiction should then be exercised, it is limited to situations of “abuse of process, forum non conveniens and the like”,[5] and it was submitted these discretionary exceptions should not be applicable in this case. I do not accept these submissions
[5] Australia Securities and Investment Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at 586 per Gleeson CJ, Gaurdon and Gummow JJ.
SUBMISSIONS OF THE WIFE
Since adjourning part way into Mr Geddes QC submissions the position of the Wife has changed. Originally she argued that there was clearly not one single justiciable controversy and that neither Porter, Sarinsson nor W Corporation should be joined to the proceedings and instead reliance should be placed upon the shareholders agreement to resolve the commercial dispute between its shareholders. Subsequently the Wife submitted that she neither opposed nor consented to the joinder of Porter but maintained her position that Sarinsson should not be joined as was said to be no longer a director of or shareholder in W Corporation. The Wife’s position in respect of the joinder of Porter is that she wished “these issues be resolved most expeditiously” and she submitted that may likely occur if this court heard whole commercial and property dispute.
The Wife submitted that Sarinsson is not a necessary party due to the effective and documented transfer of his shareholding to Porter on 25 May 2007 pursuant to clause 5.3 of the Shareholders Agreement. There was no evidence before the court which suggested that Sarinsson still holds shares in W Corporation. It is conceded on behalf of the Husband that Sarinsson has resigned his directorship. It was submitted that by virtue of the evidence of Sarinsson’s sale of his interest in W Corporation, his rights could not or should not be affected by an order of the court and he is not necessary as a party to determine the many complex issues in the commercial dispute between the Husband, Porter and W Corporation.
Generally her submissions were ultimately targeted at achieving a final outcome for her which is understandable, but which simply and conveniently disregarded all of the offshore commercial disputes and what I regard as the reality of this case.
SUBMISSIONS OF THE SECOND AND THIRD RESPONDENTS
In the initial proceedings, Porter and Sarinsson were represented jointly and made common submissions. Subsequently Sarinsson has ceased to be represented by Carew Counsel Pty Ltd and in these further proceedings appeared in person. The written submissions received on behalf of both of them argued that there was no single justiciable controversy and that the Family Court did not have accrued or any other jurisdiction to hear and determine the substantial application of the Case Guardian.
PORTER
Porter accepted as a principle that the Family Court of Australia “could have jurisdiction to determine whether [he] be made a party to the proceedings, and if made a party, whether it is appropriate on all the facts of this case to remove him as a party”.[6]
[6] Further Submissions on Behalf of Porter Filed 26 June 2008 at Page 1.
Ms Nikou submitted that Porter should not be a party to the family law proceedings as these are matrimonial proceedings between the Husband and Wife and do not concern the commercial ‘arms length’ relationship of the Husband, Porter, W Corporation and others within the commercial dispute to be determined.
It was further submitted that the “court should exercise its discretion against the application of the Case Guardian” and that applying the very carefully stated six principles in Warby v Warby (2001) FLC 93-091; 28 Fam LR 443 (‘Warby’) the Family Court should either:
a)“not permit [Porter] to be made a party to the proceeding; or
b)if he is named as a party the court should grant the application to remove him under Rule 6.04”.[7]
[7] Ibid, 2.
It was submitted that Porter was not a necessary party to the proceedings as between the Husband and Wife under Rule 6.02 and that it is not “reasonably necessary” to join Porter to determine the value of the Husband’s shareholding in W Corporation given that the Husband was said to want to dispose of all of his shares and that “there is no allegation of intermingling of the finances of the Husband with those of [Porter]”. [8]
[8] Ibid, 2.
It is further submitted that the allegations of Porter’s improper conduct (which were generally denied) do not require him to be joined as a party in the proceedings and that the Shareholder’s Agreement “covers the field” and that any dispute is one which can and should be properly determined by a single expert or upon forensic analysis as provided for in Clause 5 thereof.
The balance, and in fact the majority of his written submissions, addressed the allegations made by the Case Guardian of improper conduct by Porter and referred to various affidavits filed which purportedly proved that much of the conduct alleged by the Case Guardian including forgery, fraud and misappropriation of monies, has not occurred. Arguably these submissions are well beyond the scope of this interlocutory hearing and any evidence of forgery, impropriety or other illegal or fraudulent conduct is what will be decided upon in an appropriate court in other commercial or criminal final hearings. The interlocutory issue here before me was as to whether the interlocutory hearing(s) should be and remain in the Family Court and with a joinder of various respondents.
In her final address Ms Nikou submitted “there is not a single matter…as between Husband Wife and third parties” and further submitted orally that there is a:
“distinction between this case, which is a commercial arms length case, with those cases where the intermingling is far more intricate and someone holds something on trust or there is a overlapping of transactions which affects the Husband and Wife directly”
Her conclusion was that this is not a case analogous with Warby[9] and Bishop & Bishop (2003) FLC 93-144; (2003) 30 Fam LR 108 (‘Bishop’) where there was a single justiciable controversy which enabled the court to exercise accrued jurisdiction. The facts of this case were said to be an internationally based, complex, project development and financing matter involving other individuals, groups and companies far beyond the matrimonial context. Porter therefore strongly asserted that there was no single justiciable controversy upon which this court should proceed as a basis to hear and determine the whole of the commercial dispute and the matrimonial proceedings.
[9] (2001) FLC 93-091; 28 Fam LR 443.
Finally it was submitted that if there was a single justiciable controversy so as to attract any accrued jurisdiction then the court should exercise its discretion not to determine the matter as the allegations raised are a consequence of a commercial dispute and arms length relationship and the individuals or the shareholders of W Corporation have already determined the forum for such disputes to be otherwise in the State Court’s of Victoria or in Fiji.
SARINSSON
Sarinsson submitted that he had validly sold his shareholding in W Corporation to Porter for $1.350 million in reliance on the permitted transfer provisions of clause 5.3 of the Shareholders Agreement and had resigned his directorship. The Case Guardian has continued to dispute that the sale of Sarinsson’s shares was valid and therefore sought to join him on the basis that he has or should in fact retain his one third shareholding in W Corporation. On all of the filed evidence and submissions, even in these interlocutory proceedings, it is very difficult both to comprehend and to accept the basis of opposition of the Case Guardian to the sale and transfer of shares which occurred over twelve months ago, as indicated earlier in this judgment. There are no current proceedings initiated on behalf of the Husband in other jurisdictions pursuant to the shareholders agreement seeking to cancel the transfer and nullify the sale. The husband has had, and now retains, commercial and family law solicitors to advise him and there is no evidence now before me of a proper challenge, not even a legal letter of demand on this matter. Tactically the inference placed before the court and indeed the oral submissions on behalf of Porter (but upon which I do not need to make a finding) are to the effect that the Husband was dissatisfied with the sale price achieved by Sarinsson for his parcel of shares and otherwise would intend to resist Porter now being the majority shareholder of W Corporation.
Given that the orders sought by the Case Guardian are directed to the interests and assets of W Corporation, which are now said by Sarinsson to be of no relevance or financial concern to him, he sought to be excluded and removed from these Family Court proceedings and has not made any further submissions in respect of any accrued jurisdiction. He simply asserts in accord with the Wife that he is not a necessary party under Rule 6.02, that there is no single justiciable controversy and that he should not be joined to the application. In the alternative if the amended application was allowed he sought to be removed from the proceedings.
ACCRUED JURISDICTION
The concept of accrued jurisdiction was considered and approved by Barwick CJ in the High Court decision of Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 (‘Philip Morris’) where his Honour concluded that a Court exercising Federal jurisdiction, in that case the Federal Court, has jurisdiction extending “to the resolution of the whole matter”[10] between the parties. The existence of accrued jurisdiction in the Federal Court has since been regularly invoked.[11]
[10] (1981) 148 CLR 457 at 475.
[11] Fencott v Muller (1984) 152 CLR 570.
In the Family Court this doctrine did not have such solid and early foundations. The doctrine was considered in a number of cases and was held either not to apply in this court for various policy or other reasons, or was not necessary to decide on the circumstances of the case. [12] It was not until the Full Court decision in Warby[13] that it was authoritatively accepted that the Family Court has and could appropriately exercise accrued jurisdiction.
[12] See further Mckay & Mckay (1984) FLC 91-573;(1984) 73 FLR 313; (1984) 59 ALR 117 (1984) 9 Fam LR 850 , Prince & Prince (1984) FLC 91-501; (1984) 9 Fam LR 481; (1984) 69 FLR 150 (1984) 54 ALR 467, Smith & Smith (No. 2)(1985) FLC 91-604;(1985) 10 Fam LR 283 (1985) 81 FLR 251 (1985) 64 ALR 227 and Ireland & Ireland & Collier (Third Party) (1986) FLC 91-731; (1986) 11 Fam LR 104.
[13] (2001) FLC 93-091; 28 Fam LR 443.
By way of context only I draw attention to the decision of the High Court in Re Wakim; Ex Parte McNally[14] where the constitutional validity of the Jurisdiction of Court (Cross-Vesting) Act 1987 (Cth) was considered and it was held that:
“Because of the language of Ch III of the Constitution, particularly s 77 thereof, and for the reasons stated by McHugh J in Gould v Brown and those given by his Honour in these cases I would hold that the States may not invest federal courts with the jurisdiction of the former.”[15]
To the extent that the Commonwealth attempted to confer State powers on Federal Courts via the Cross-Vesting scheme the High Court held such an attempt to be constitutionally invalid. However, the Act remains valid so far as it confers State Courts with Federal or Family Court jurisdiction so as to enable them to hear and determine appropriate matters which would otherwise be within federal jurisdiction. This decision therefore confirmed the position that the only way for any Federal Court to exercise jurisdiction to hear and determine a matter which would ordinarily come within the jurisdiction of a State Court, is pursuant to its accrued jurisdiction.
[14] (1999) 198 CLR 511.
[15] Ibid, 626 per Callinan J.
In Fencott v Muller (1984) 152 CLR 570 (‘Fencott’) Mason, Murphy, Brennan and Deane JJ said:
“Perhaps it is not possible to devise so precise a formula that its application to the facts of any controversy would determine accurately what claims are disparate and what claims are not. Whatever formula be adopted as a guide – and the formula of “common transactions and facts” is a sound guide for the purpose - it must result in leaving outside the ambit of a matter a “completely disparate claim constituting in substance a separate proceeding” (per Barwick C.J. in Felton v. Mulligan (16)), a non-federal matter which is “completely separate and distinct from the matter which attracted federal jurisdiction” (per Murphy J. in Philip Morris (17)) or “some distinct and unrelated non-federal claim” (per Stephen, Mason, Aickin and Wilson JJ. In Moorgate Tobacco (18))”[16]
[16] (1984) 152 CLR 570 at 607.
This case therefore clearly highlights that a distinction must be drawn between matters arising for determination out of a common factual matrix and those arising out of various and disparate facts which are distinctly unrelated and completely severable from the matter to be properly decided by the Family Court in exercise of the jurisdiction properly vested in it by the Act.
In Stack v Coast Securities Pty Ltd (No 9) (1983) 154 CLR 261 the High Court emphasised that the ultimate question in deciding upon whether accrued jurisdiction is available is if there a single justiciable controversy and that therefore must be the central concern when evaluating the evidence.
The authorities which Mr St John highlighted in his written and oral submissions support the proposition that a court, when determining whether there is a single justiciable controversy, should not attempt to artificially delineate what is in truth a single controversy. Their Honour’s Mason, Murphy, Brennan and Deane JJ in Fencott said:
“In identifying a s.76(ii) matter, it would be erroneous to exclude a substantial part of what is in truth a single justiciable controversy and thereby to preclude the exercise of judicial power to determine the whole of that controversy, What is and what is not of the one controversy depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships. The scope of a controversy which constitutes a matter is not ascertained merely by reference to the proceedings which a party may institute but may be illuminated by the conduct of those proceedings and especially by the pleadings in which the issues in controversy are defined and the claims for relief are set out. But in the end, it is a matter of impression and of practical judgment whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter. A judicial power which is not exercised to determine the whole of the controversy is, generally speaking, not appropriately and conveniently exercised. Not appropriately, because the controversy is not quelled; not conveniently, because the parties – the principal beneficiaries of the exercise of judicial power – must litigate anew to have the outstanding questions and issues determined. The reference by Barwick C.J in Philip Morris (20) to what is necessary or convenient for the resolution of a federal claim is perhaps too restricted a limitation on the ambit of “matter” Such a test would be unexceptionable.”[17]
[17] Ibid, 608.
These principles were adopted by the Full Court in Warby[18] in holding that accrued jurisdiction is available in the Family Court. They have been conveniently summarised in six factors to which the Court must have regard when deciding if it has and should therefore exercise accrued jurisdiction. Those factors are:
[18] (2001) FLC 93-091; 28 Fam LR 443.
(i)what the parties have done;
(ii)the relationships between or among them;
(iii)the laws which attach rights or liabilities to their conduct and relationships;
(iv)whether the claims are part of a single justiciable controversy and in determining that question whether the claims are “attached” and not “severable” or “disparate”;
(v)whether the claims are non-severable from a matrimonial cause and arise out of a common sub-stratum of facts; and
(vi)whether the Court has the power to grant appropriate remedies in respect of the “attached” claims.[19]
[19] Ibid, Paragraph [95].
Each factor should be carefully evaluated in reference to the specific facts arising in this case.[20]
[20] Bishop (2003) 30 Fam LR 108; (2003) FLC 93-144; [2003] FamCA 240 at Paragraph [35].
There is authority which suggests that the sixth factor is relevant only to the question of discretion after the first five factors have established on the proper facts that there is a single justiciable controversy. For this reason the sixth factor, along with other authorities on the question of the extent of any discretion available to me, have been considered separately below.
IS THERE A SINGLE JUSTICIABLE CONTROVERSY?
Mr St John, in his submissions on each of the headings suggested that the application of these factors in this case uncontroversially lead to the conclusion that accrued jurisdiction was available and should be exercised. That was a somewhat bold and very forthright submission with which I do not agree. Even on the original facts and the extent of the commercial dispute detailed to this court in October 2007 that was a most unlikely scenario. Even more so now with the filing of the amended applications and further interim and interlocutory orders sought and with the contents of the subsequent affidavits and annexures, the commercial and property disputes now before the court are far broader and both commercially and legally far more extensive than originally foreshadowed. As an example there are now specific complaints alleging a breach of fiduciary obligations, manipulation of loan accounts, diversional payments of monies to other entities associated with Porter and ongoing payment(s) of unreasonable and exorbitant management fees.
Earlier Reported Cases Where Accrued Jurisdiction Was Exercised
Warby & Warby[21]
[21] (2001) FLC 93-091; 28 Fam LR 443.
The Full Court (Nicholson CJ, Finn and Strickland JJ) held that the single justiciable controversy in that case concerned each of the party’s (the Husband, the Wife and the Wife’s father) interest in a single property. The issues were the deciding of certain facts including contributions and repayments made pursuant to an agreement between the wife and her father discharging a mortgage held over the property. The property was the main asset of the marriage and the issues which arose for determination were from a common factual matrix as between the three parties.[22]
Bishop & Bishop[23]
[22] Ibid, Paragraph [93].
[23] (2003) FLC 93-144; (2003) 30 Fam LR 108.
The facts of this case are centred around a history of the husband and his family and their commercial dealings, with which the wife was also heavily involved both as a director of various family companies and also as a beneficiary of established trusts. The wife sought the joining of the other parties on the basis of refuting various financial dealings which took place amongst the family businesses and trusts. The Full Court (Nicholson CJ, Kay and Young JJ) held that given both the Husband and Wife’s involvement in those commercial transactions and the factual history of their marriage, the determination of the non-federal claim was an essential element and non-severable from the federal claim.
“In this case there can be no doubt that the financial affairs of the Husband and the Wife are and have been intimately interwoven into the financial affairs of the parties sought to be joined. It is impossible to determine the issues as to the parties' financial affairs without unravelling them.”[24]
[24] Ibid, Paragraph [36].
Furthermore in Bishop none of the parties sought to be joined appeared nor made submissions in respect of their joinder and the Full Court said:
“In cases where all that is sought is the joinder of parties, particularly where there is no opposition to it, a judge hearing an application for joinder should be very slow to refuse it”[25]
The facts and the interwoven financial affairs and the extended involvement of immediate family and the wife’s role in particular, markedly differ from those in the proceedings now before me.
Warby Factors
[25] Ibid, Paragraph [38].
(i) what the parties have done
In my evaluation of the first of these factors I have examined the history and contributions (or lack thereof) of the Husband, Wife, Porter, Sarinsson and W Corporation in regards to the issues in dispute. The Wife has no direct knowledge of and has had no financial or commercial involvement with W Corporation, nor in the offshore tourist resort development nor the commercial dispute. She is exclusively a commercial bystander forced to participate in or await the outcome of these complex interlocutory commercially financial and injunctive proceedings in the hope and expectation that one day the net asset position of the Husband’ shareholding may be determined and will be relevant to the basis of a just and equitable division of property in final Family Court, s79, proceedings.
The contractual, commercial and business history of the various potential parties and the Husband has been focussed on Fiji and the many commercial, financial and corporate allegations and breaches which are alleged to have occurred in that country. Mr St John submitted that the relevance of this first factor is in part that the Husband wants to sell or transfer his shareholding in W Corporation and that Porter is the ideal, if not the only person likely to want to acquire that shareholding. If that is one of the bases of the submission to attract accrued jurisdiction then it is rejected.
I conclude that it is relevant that the parties negotiated and executed a shareholders agreement which provided a clear avenue for commercial action to be taken by any of its signatories in the event of a commercial or shareholding dispute. The Husband has elected, intentionally, to avoid this procedure and mechanism for dispute resolution and it is on that basis that he has endeavoured to bring the whole of the commercial dispute under the umbrella of the jurisdiction that he has submitted should vest with the Family Court on the particular facts in this case.
(ii) the relationships between or among them;
As to the second factor, the existing relationships between the parties or potential parties, the Case Guardian submits that the sibling relationship between the Wife and Sarinsson is significant. Ms Nikou’s submission was that the relationship between the Husband, on the one hand and Porter and W Corporation on the other, was an “arms length commercial transaction”. There is much merit in that submission. I find that this relationship was incidental to the commercial dispute and I find that Sarinsson was an original partner in the offshore tourist project because of financial, commercial and personal capabilities beyond any mere sibling relationship.
I have been helped by the clear identification of related issues and the distinguishing features of previous cases where the Family Court has exercised jurisdiction and record the close immediate familial relationships in those cases as being intimately interwoven with the non-federal claims. This case, save for a sibling relationship between Sarinsson and the Wife, does not have the kinds of personal and family relationships which I view as intended to be of a level of significance under this factor.
(iii) the laws which attach rights or liabilities to their conduct and relationships;
Mr St John relied upon this factor as one of significance and submitted that if the Case Guardian is not permitted to pursue her claims under the accrued jurisdiction of this Court then the Husband would likely be faced with the alternative requirement of instituting proceedings for a winding up of W Corporation within the courts of Fiji. That may or may not be the available or appropriate course of action and I make no finding in that regard. What I do repeat, and in this regard the various Warby[26] factors are somewhat interwoven, is that there is an executed shareholder’s agreement which has been conveniently or otherwise ignored in the advice given to the Husband. Insofar as there was reference to and reliance upon the reported decision of Prince v Prince (1984) FLC 91-501 by the Case Guardian I do not agree that this court should or has the power to hear and determine the issues raised in dispute simply by virtue of the delay which may or may not result from proceedings in other courts needing to be determined. If proceedings within the commercial dispute context have to be heard and determined in Fiji, or in other State Courts of Victoria then that is appropriate. I reject the contrary argument that, simpliciter, the Family Court should exercise its accrued jurisdiction to hear any related and or ancillary dispute.
(iv) whether the claims are part of a single justiciable controversy and in determining that question whether the claims are “attached” and not “severable” or “disparate”;
[26] (2001) FLC 93-091; 28 Fam LR 443.
Under the fourth factor the Case Guardian submitted that the narrow test espoused by Wilson J in Phillip Morris[27] of whether “it may be that the nature of the federal law is such that in some cases the grant of relief under it will be dependent upon the resolution of non-federal questions”[28] was of significant guidance. It was submitted that the federal question of the property division between parties to a marriage cannot be resolved without the determination of the non-federal question, the commercial issues which need to be determined in order to value the Husband’s shareholding. It was therefore submitted that the s79 proceedings between the Husband and Wife cannot be finally determined without a full investigation and court determination of the allegations made by the Husband affecting his shares and interests in W Corporation. It is to this extent that it was submitted that the non-Federal claims form part of a single justiciable controversy and are part of the factual matrix of the property proceedings.
[27] (1981) 148 CLR 457.
[28] Ibid, 545.
Again Ms Nikou emphasised that the relationship among the W Corporation shareholders and directors was that of an “arms length commercial dealing” and therefore was completely separated from s79 proceedings between the Husband and Wife. It is clear on the current evidence and the Wife’s relative silence on this issue that her role, if any, in the hearing of the disputes between the Case Guardian, W Corporation and Porter will be of no significance. She can give no account of their commercial and other actions and therefore those disputes and the facts from which they have arisen are both severable and disparate.
(v) whether the claims are non-severable from a matrimonial cause and arise out of a common sub-stratum of facts; and
As to the fifth factor Mr St John referred to the judgment of his Honour Mason J in Philip Morris[29] where his Honour said:
“The classification of a claim as ‘non-severable’ does not necessarily mean that it is, or must be, united to the federal claim by a single claim for relief”
[29] Ibid, 512.
Furthermore his Honour said that “it may appear that the resolution of the attached claim is essential to a determination of the federal question”. The submissions made by the Case Guardian over the course of this interlocutory proceeding were outlined above in paragraphs 57 to 65 inclusive, and in particular the allegations made against Porter, Sarinsson and W Corporation were outlined in paragraphs 59 and 60. In accordance with the numerous allegations the Case Guardian ultimately sought (inter alia) the following orders: (i) Declaration that the conduct was in breach of fiduciary duty;
(i)Payment of equitable compensation;
(ii)The holding of accounts and inquiries;
(iii)The appointment of a receiver and manager to, inter alia, sell the assets and undertaking of [W Corporation]; and
(iv)Requiring [Porter] purchase the Applicant’s shares at a fair value
Of these five orders sought none is clearly or uncontroversial within the powers of the Family Court. Arguably s90AE of the Family Court has been extended to enable the court to make the order contemplated in (v) above, however, this order could only be made upon ascertaining the value of the husband’s W Corporation shareholding, which would require the determination of a myriad of other commercial disputes and controversies unrelated to the s79 proceedings.
It was argued that on a broad and overly simplistic view of the facts of this case that the single justiciable controversy is the Husband’s and Wife’s interests or entitlements in various assets or properties, including in W Corporation through the Husband’s one third shareholding. I do not agree. I find that the proper and intended approach to the understanding of the single justiciable controversy is not to simply broaden the issues and disputes so as to fall under one umbrella, as arguably this could be done for every contentious matter before the Family Court. If this were the correct approach it could enable the absurd result of allowing a Husband or Wife in s79 proceedings who may also be a director in a commercial entity (for example BHP Billiton was an extreme example raised by Ms Nikou during her submissions) to then bring into this jurisdiction allegations of corporate impropriety, mismanagement, criminality and breaches of equitable duties for judicial determination under the single justiciable controversy of a matrimonial property division. Such a result is clearly not and should not be the intended result and purpose of attracting of accrued jurisdiction.
In Bishop it was held that a “single justiciable controversy” did “not mean a single justiciable issue”.[30] Therefore accrued jurisdiction will not be found to be unavailable simply because the Case Guardian raised more than one issue to be determined:
“The reason why the jurisdiction is exercised is to enable the real issues to be determined between the parties, the underlying purpose being to do justice between them”[31]
[30] Bishop (2003) FLC 93-144; (2003) 30 Fam LR108 at Paragraph [37].
[31] Ibid.
I conclude that it would not do justice to the Wife and others and would likely bring about an unfair outcome to require the commercial dispute to be litigated in the Family Court. It would most likely be at a very significant financial cost and expense to the Wife and others which may be unable to be fairly adjusted in any consequential orders. Likewise justice would not likely be provided to Sarinsson for similar financial and delay reasons, particularly if the sale of his shares was validated in any final hearing. On the other hand, the assumption of jurisdiction by this Court and its hearing the matter may well not extend justice to the Husband (via his Case Guardian), Porter or W Corporation given the complex commercial, work and labour done and financial disputes in issue.
In her original written submissions earlier filed with the court on behalf of both Porter and Sarinsson, Ms Nikou detailed her response to the factors outlined in Warby[32] and the issue of a single justiciable controversy. Her written submissions (with which I have now largely expressed agreement) in regard to the Warby factors were:
“20. The litigation between the Husband and the Wife is complex and there are innumerable allegations requiring findings which [sic] allegations have nothing whatsoever to do with the potential third parties sought to be joined.
21. The joinder of the proposed second and third respondent will add complexity and cost to the proceedings in the Family Court.
22. The proposed second and third respondents deny any alleged wrongdoing in their transactions as shareholders of [W Corporation] and the [W] development and in any conduct related to [W Corporation] and [W] development. The resolution of the allegations against the proposed second and third respondents is a commercial dispute capable of being determined by the County Court where proceedings were previously instituted.
23. There is insufficient overlap of the factual context of the family law proceedings and the commercial proceedings.
24. The commercial dispute does not arise out of the family law dispute nor vice versa. There is no interweaving of the financial affairs of the Husband and the Wife with the financial affairs of the potential second and third respondent.
25. The applicant must identify the relief sought against the proposed second and third respondent and the grounds upon which such relief is established. A justiciable issue has not been established appropriately and no joinder should therefore be ordered”[33]
[32] (2001) FLC 93-091; (2001) 28 Fam LR 443.
[33] Summary of Argument of the proposed 2nd and 3rd Respondents Filed 22 Oct 2007, Paragraphs [20] – [25].
As a further guide to the question of whether or not there is a single justiciable controversy I was assisted by the judgment of Gummow and Hayne JJ in Re Wakim; Ex Parte McNally[34] where they said:
“Often, the conclusion that, if proceedings were tried in different court there could be conflicting findings made on one or more issues common to the two proceedings will indicate that there is a single matter. But contrast, if the several proceedings could not have been joined in one proceeding, it is difficult to see that they could be said to constitute a single matter”
[34] (1999) 198 CLR 511 at 586.
As the Wife was not said to be involved in any of the issues in conflict with Porter and the commercial dealings of W Corporation, there should be no possibility of inconsistent findings of fact if these issues were to be decided in their appropriate jurisdictions. They are clearly two, or many more, distinct controversies. There is clearly no common substratum of facts to the federal and non federal claims.
OVERVIEW OF WARBY FACTORS
On an overview of all of the factors in Warby[35] and having individually considered and evaluated each of them I conclude that the financial affairs of the husband and wife and s79 issues are largely, if not completely, separate from those of the commercial dispute involving the Husband, Porter, Sarinsson and W Corporation. They are therefore in no way intimately or otherwise interwoven so as to justify the finding of a single justiciable controversy. There are no common transactions between the husband and wife and the husband, Porter, Sarinsson and W Corporation. I find that it would not do justice to any of the persons appearing in this interlocutory hearing to litigate all the commercial dispute and any other issues in the Family Court.
[35] (2001) FLC 93-091; (2001) 28 Fam LR 443.
Finally on the question of whether or not there is a single justiciable controversy, in addition to the Warby[36] factors the majority in Fencott said that:
“in the end, it is a matter of impression and of practical judgment whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter”.[37]
[36] Ibid.
[37] (1984) 152 CLR 570 at 608.
Here as a matter of impression and practical judgment I find that the commercial disputes between the Husband and Porter and/or Sarinsson and/or W Corporation are not within the ambit of the matter to be determined in the proceedings presently before this court, that being the division of property pursuant to s79 of the Act. It may be that matters of “impression and practical” judgement are more appropriately to be considered under the heading of discretion and I now turn to consider that issue.
EXERCISE OF DISCRETION
Considering the first part of the accrued jurisdiction test has been answered in the negative it is now unnecessary to decide upon the extent of any discretion I might have exercised if accrued jurisdiction were available. If I am found to be in error in concluding that there is no single justiciable controversy I briefly summarise my position as to why any discretion I have would not have been exercised in favour of joining and hearing the dispute(s).
There does seem to exist a level of judicial discussion as to the extent, if any, that discretion is available to the trial Judge in deciding whether or not to exercise jurisdiction. I record what has been said by the Full Court, in particular in Bishop that:
“Even where a case clearly attracts accrued jurisdiction there is still a discretion in the Court as to whether to exercise that jurisdiction”[38]
[38] Bishop (2003) FLC 93-144; (2003) 30 Fam LR 108at Paragraph [27] per Nicholson CJ, Kay and Young JJ.
In relation to the final Warby[39] factor of “whether the court has the power to grant appropriate remedies in respect of the ‘attached’ claims” Mr St John submitted that ss90AE and 90AF are unique remedies available in the Family Court which would not be available overseas or in Victorian State Courts and that therefore this Court is a more appropriate forum for the granting of the relief finally sought. This may be correct however the availability of a certain remedy unique to the Family Court does not bring within this court’s jurisdiction a myriad of claims which are necessary to be determined prior to being able to grant any remedy under those provisions. The relevance of ss90AE and 90AF is that if a single justiciable controversy was found to exist it would be a factor in favour of exercising the accrued jurisdiction for the reason that the remedies sought are readily available by the exercise of the Family Court’s statutory powers.
[39] (2001) FLC 93-091; 28 Fam LR 443.
The extent to which there exits an independent discretion, if accrued jurisdiction is established, was carefully expressed by the Full Court (of which I was a member) in Bishop[40] where it was said:
“We think some caution and a very careful examination of the facts needs to be exercised before applying the general notion that if a court has jurisdiction it ought exercise it when dealing with claims involving third parties in family law cases. That caution having been said, if, as in this case, the facts support the exercise of accrued jurisdiction, the Court ought not to shy away from it. It is a very important and necessary part of the Court's powers”.[41]
[40] (2003) FLC 93-144; (2003) 30 Fam LR 108.
[41] Ibid, Paragraph [33].
I conclude that after very careful examination of the evidence and submissions before the court, even if I were found to be in error in determining that there is not a single justiciable controversy, I would nevertheless decline to exercise my discretion in favour of hearing the claim under the accrued jurisdiction for all of the reasons given herein.
SECTIONS 90AE (1-4), 90AF AND 90AK
Given that submissions were initially made on behalf of the parties as to the availability of orders of the kind sought in the Case Guardian’s amended Form 1A pursuant to the provisions of ss90AE and 90AF of the Act I record that I have reflected upon and evaluated those arguments. I have concluded that the issues arising from those submissions are unnecessary or unable to be decided in this interlocutory hearing given what has been found by the rejection of any accrued jurisdiction. Should a valuation of the husband’s shareholding in W Corporation be ascertained or agreed it may perhaps then be argued and be (but I do not decide) that this court could then entertain making an order of the kind foreshadowed by the Case Guardian in the amended response. For the purposes of this interlocutory hearing and on the facts hereof the scope and impact of ss90AE and 90AF have not otherwise been fully considered as it is not possible to make the final orders contemplated without the broader commercial disputes being finally resolved.
The Case Guardian, in written submissions, set out the provisions of 90AE and 90AK and said that:
“in the circumstances of the present case in the proceedings between the husband and the wife for an alteration of interests in property under s 79, the court may:
· Direct the other shareholders to do a thing in relation to the property of the husband (eg acquire his one third shareholding in [W Corporation]); or
· Alter the rights, liabilities or property interests of the other shareholders (or [W Corporation]) in relation to the marriage (eg sell their shareholdings in [W Corporation] and or [W Corporation] itself),
as the making of such order is reasonably necessary to effect a division of property between the husband and the wife”
It was further submitted that the realisation of the Husband’s shareholding was “[r]easonably necessary to effect a division of property between the parties to the marriage, as required by sec 90AE(3)(a)”[42]and that “[i]nsofar as the Application of the Case Guardian seeks Orders pursuant to Sections 90AE & 90AF it is submitted the granting of leave joining the proposed respondents [Porter] and [Sarinsson] cannot properly be refused”.[43]
[42] Summary of Argument of Case Guardian Filed 5 October 2007, Paragraph 13.
[43] Supplementary Submissions of the Case Guardian Filed 17 June 2008, Paragraph 5.
In his oral submissions in October Mr St John argued that the Case Guardian:
“is entitled to say under the act that Mr [Porter] should acquire the husband’s interest, that’s a matter he is entitled to do and clearly Mr [Porter] has to be before the court”.[44]
Mr St John relied upon the statement of Kay J in AS & GW & AH [2006] FamCA 432; (2006) FLC 93-265 at paragraph 18:
“The Act really does not make provision for the joinder of parties. It provides for the Court to make orders against third parties, that is under s 90AE and it provides that they must be accorded procedural fairness in relation to the making of the orders. So that, if an application names them as parties, they effectively become parties to the proceedings. The Family Law Rules 2004 set out some of the circumstances in which applications may be issued out of time or after the proceedings have reached a certain stage, and, in some circumstances, that requires the leave of the Court for the addition of a party.”
[44] Transcript of proceedings 23 October 2007, Page 27 line 28.
Mr St John submitted that Kay J endorsed that s90AE is not a ground for joining parties but it is justification that if an application names other respondents as parties they effectively become parties. This may perhaps be an interpretation of his Honour’s statement however it was acknowledged by all involved in this hearing that this case has progressed too far to enable parties to be so joined and the addition of parties must be done in accordance with Rule 11.10. I do not accept on the facts of this interlocutory hearing that the operation of s90AE should determine whether to join the respondents, distinct from a consideration under the Warby factors when determining accrued jurisdiction. I agree with Kay J that it is not a section which, standing alone, provides a mechanism for the joining of parties.
Finally the Case Guardian noted that:
“even if the procedure within the Shareholders Agreement was pursued, it would not bind the Family Court for the purposes of the Section 90AE & 90AF claim. Absent the consent of the parties, the Court would have to independently determine the appropriate purchase price”.[45]
It may be that the price determined by the mechanism provided for in the Shareholders Agreement could vary from any order which may or may not be ultimately pronounced for purchase of or dealing with the Husband’s shareholding. However it is not for me, in these interlocutory proceedings, to prejudge what outcome may or may not result from a full and proper determination of the s79 property application on the evidence that will then be available. As at the date of this hearing the Family Court does not have the evidence or the proper jurisdiction to determine independently what would be an appropriate purchase price.
[45] Final Responding Submissions of the Case Guardian Filed 25 June 2008, paragraph 21.
Ms Nikou drew attention to paragraph 113 in H & H (2007) 36 Fam LR 64; [2006] FamCA 167 where O’Ryan J upheld the constitutionality of Part VIIIAA and in doing so made the following remarks in relation to the operation of s90AE:
“When s 90AE(2) is read in conjunction with s 90AE(3), s 79, and Part VIIIAA generally, it is clear that what is contemplated is not some arbitrary invasion of the rights of a third party but an alteration of those rights where they are sufficiently connected to the division of the property between parties to a marriage”
I find that the alteration of such rights on the facts now before me is not sufficiently connected to s79 proceedings.
The joinder of third parties is here primarily for a purpose somewhat separate and apart to property discussion and sub-ss90AE(1) and (2) are operative within what I regard to be only the true and genuine ambit of s79 proceedings. Such is not the situation on the facts now before me. In response to paragraph 5 of the supplementary submissions of the Case Guardian (document 258 in the court index) I can and do refuse such leave to join the respondents.
Ms Nikou also referred to the judgment of Cronin J in Christie & Christie [2007] FamCA 125; (2007) Fam LR 181 where his Honour, at paragraph 82, considers the meaning of “reasonably necessary” for the purposes of granting an injunction under s90AF:
“In this case, is it reasonably necessary to make the order? In what circumstance could it be argued that it was “reasonably necessary”? In an unreported decision of Bennett J on 27 February 2006 of W and W and P[46], her Honour granted a very limited injunction against a bankruptcy trustee because he was about to evict the Wife and two children and sell the house in which they lived. Her Honour granted the injunction because the Wife wanted to keep the house and was endeavouring to raise the finance. I think “reasonably necessary” means that without the order, the property proceedings between the Husband and Wife will be thwarted in the same way that Bennett J was referring to it.
The provision goes on also to say “or reasonably appropriate and adapted” and I interpret those words to mean “convenient”. On what I have read in these proceedings, it would be more convenient for all issues to be determined in this Court and the Respondents would not be prejudiced.
Section 90AF(3)(b) relates to whether at this moment it is foreseeable that the injunction would result in the debt not being paid in full. Nothing I am prepared to order would have that effect on the basis that I am allowing the Respondents to litigate their cause in this Court and the ultimate payment of their debt would be dependent upon them proving the debt. If they are successful it seems clear that there are probably sufficient funds for them to be paid. In respect of their involvement in the proceedings, I am taking into account that the current provisions of section 79(10) permit them to participate in the proceedings.”
[46] [2006] FamCA 163.
Insofar as Mr St John relied upon s90AK I do not regard that for the purposes of determining this interlocutory issue that provision is helpful or persuasive.
I conclude on all of the evidence now before me that it is not reasonably necessary, appropriate nor convenient to allow the extension of the s79 proceedings and for the commercial dispute to be heard and determined in this Court. I clearly distinguish each of the above reported decisions from the facts of this case.
DECISION OF FULL COURT IN B PTY LTD AND ORS & K & K (2008) Fam CAFC 113
On Thursday of last week, 31 July 2008, the appeal to the Full Court from the judgement of Morgan J in K & K [2005] FamCA 997; (2005) FLC 93-237; (2006) 34 Fam LR 266 discussed in paragraphs [30] – [33] of this judgment, was handed down. Relevant for the purposes of this interlocutory judgment are the comments of the Full Court in relation to the joining of parties at paragraph 52 therein:
“We do not accept that it is proper to allow joinder of third parties merely upon the formulation of a paragraph in, or to be added to, an application, on the basis that at trial facts to support the application may be asserted and proved. Sufficient facts must be asserted to demonstrate that, if proved, the law arguably provides the relief sought”
Furthermore pursuant to my preliminary views in paragraphs [119-129] in regards to the availability of certain orders which may be made pursuant to s 90AE when this case reaches final hearing, it is useful to draw attention to the Full Court’s judgment on the scope of 90AE and the ambit of the Court’s power to grant appropriate third party orders:
“28. That the elements of the “action” which the wife seeks to initiate cannot be identified is a powerful argument against the position for which Mr North contends. In our view, all that s 90AE(2)(b) does, of relevance to the wife’s claim here, is to enable the court to adjust the property interests of a third party for the purpose of effecting a division of the present property of the parties to the marriage, between those parties. Only in the sense that altering interests may leave a bundle of rights or interests that are consequent upon the alteration, may the exercise of power create interests, but these “new” interests will be the residue of what already existed at law. Except in this sense, the subsection does not create a new cause of action derived from rights not previously known to the law. In this sense, the subsection resembles a machinery provision, though in our opinion it is more than that.
…
33. In contrast, the power in s 90AE(2)(b) to alter the property interests of third parties in relation to a marriage, is not underpinned by any extension of the definition of property for the purposes of paragraph (ca) of the definition of matrimonial cause, or by any requirement that the “claim” reliant upon the exercise of power in s 90AE(2)(b) be treated as property for the purposes of the paragraph. However, we are not convinced that the comparison of the provisions granting a power relating to a party’s indebtedness to a third party creditor to the provisions granting a power relating to an alteration of property interests is valid for the purposes of the argument of the third parties.
…
34…But the claim must either be a matrimonial cause, one within the associated or accrued jurisdiction of the Court, or one which, in a matrimonial cause or other claim being heard together with such a cause, invokes a power conferred upon the court.
…
63…Any order made pursuant to s 90AE(2)(b) must be for the purposes of effecting a division of property between the parties, The order that the wife proposed was for the purposes of increasing the property of the parties, by an unknown amount and on unknown principles.”
CURRENT INTERIM INJUNCTIVE ORDERS AND APPLICATIONS FOR COSTS
There are current interim injunctive orders in place restraining Porter from dealing with the assets of W Corporation or raising further finance for related purposes. Those orders were extended with the consent of Porter and all other persons involved in this interlocutory hearing to 8 August 2008. Together with the Case Guardian’s application to amend her Form 1A which sought to join the additional persons to the s79 proceedings, she has also filed a further Application in a Case seeking various interlocutory injunctions against Porter, Sarinsson and W Corporation. That application was the next application to be heard in this Court. Given the orders that I have now pronounced I will hear submissions from the parties and others as to the further hearing(s) and what should be the subject matter(s) thereof.
I indicate to the parties and others that I will hear and determine any application that may be made in relation to costs sought in respect of these interlocutory proceedings on the next return date. To that end preparation of any intended costs arguments and quantification of costs should be prepared.
I finally return to a very serious matter that I have raised with all Counsel and parties and the various respondents on many previous occasions. It is that there must be a greater level of commercial and legal common sense applied to this case. The legal costs and disbursements, and associated costs of and incidental to the preparation and hearing of all interlocutory applications must be very substantial. I do intend to require there to be full disclosure of costs hereafter pursuant to Rule 19.04 but I now take this further opportunity to urge the clients and all legal practitioners to confer, discuss and mediate all of the commercial disputes and ultimately the outstanding s79 matrimonial dispute. The hearing of all interlocutory applications has unfortunately extended over some years and in various courts. There may be no end in sight to the commercial and other litigation. Finality is required and that will be best achieved by negotiation and out of court discussion and resolution. I have, however, made these observations many times before with no success.
I certify that the preceding paragraphs are
a true copy of the reasons for judgment herein
of The Honourable Justice Young
………………………………………………………..
Associate:
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