Cule and Cule and Ors

[2010] FamCA 292

FAMILY COURT OF AUSTRALIA

CULE & CULE AND ORS [2010] FamCA 292

FAMILY LAW – PRACTICE AND PROCEDURE – Joinder – Inappropriate for parties to be joined – Costs

Family Law Act 1975 (Cth)

B Pty Ltd and Ors and K and Anor (2008) FamCAFC 113
Gould v Gould; Swire Investments Limited (1993) FLC 92-434

APPLICANT: Ms Cule

RESPONDENT: Mr Cule

2^ND RESPONDENT: E Pty Ltd

3^RD  RESPONDENT: P Pty Ltd

4^THRESPONDENT: N Industries Pty Ltd

5^THRESPONDENT: C Livestock Pty Ltd

FILE NUMBER: DGC 3804 of 2008

DATE DELIVERED: 19 April 2010

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: 19 APRIL 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR CROZIER-DURHAM

SOLICITOR FOR THE APPLICANT: STIDSTON & WILLIAMS WEBLAW

THE RESPONDENT: IN PERSON

COUNSEL FOR THE 2^ND, 3^RD, AND 4^TH RESPONDENTS: MR CROFTS

SOLICITOR FOR THE 2^ND, 3^RD, AND 4^TH RESPONDENTS OAKLEY THOMPSON & CO PTY LTD

Orders

1. That all outstanding applications are adjourned to 9.00am on 27 July 2010 before me for further mention as to the readiness of the applications as between the parties for final hearing.

2. That the second, third, fourth and fifth respondents to these proceedings be forthwith discharged from the proceedings.

3. That the court record forthwith show that the proceedings are only as between the husband and the wife.

4. That the husband and the wife each pay to Oakley Thompson and Co Pty Ltd on behalf of the second, third and fourth respondents, the sum of $2000 each and that such payment be made by 4.00pm on 19 May 2010.

5. That the reasons for these orders be made available as soon as possible.

IT IS CERTIFIED:   

1. That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: DGC 3804  of 2008

MS CULE

Applicant

And

MR CULE

Respondent

And

E PTY LTD

2^nd Respondent

And

P PTY LTD

3^rd Respondent

And

N INDUSTRIES PTY LTD

4^th Respondent

And

C LIVESTOCK PTY LTD

5^th Respondent

REASONS FOR JUDGMENT

1. On 19 April 2010, I made orders which are set out at the commencement of these reasons save that I reserved the question of the quantum of the costs be paid by the husband and wife.

2. My reasons for the orders I made are set out hereafter.

3. On 11 November 2008, the wife filed an application seeking orders relating to financial relief against the husband.  Apart from seeking to retain the former matrimonial home, the orders she proposed were undefined.  At the time she filed her application, the wife also filed a financial statement in which she showed that there were interests in corporate entities but she did not know their value. 

4. On 16 January 2009, the husband then represented by solicitors, filed a response to the wife’s application.  He sought no orders with any precision but otherwise joined issue with the wife.  He also filed a financial statement which said that there were corporate interests but the values of those were not known.

5. The parties attended a case assessment conference with a registrar on 20 January 2009.  The court file records show that there was no indication in the orders made by the registrar about any concerns of the involvement of third parties to the proceedings.  A conciliation conference was ordered.

6. At a conciliation conference on 22 September 2009, the registrar noted that there was in fact a dispute between the husband and his brother about commercial interests. 

7. At a directions hearing on 20 November 2009, the registrar who had not previously conducted any of the hearings noted on the court orders that the husband was in dispute with his brother but that the brother had not been “joined” to the proceedings.

8. On 8 December 2009, the wife filed an amended application.  The amended application named E Pty Ltd, P Pty Ltd, N Industries Pty Ltd and C Livestock Pty Ltd as parties to the proceedings.  These parties became respectively the second, third, fourth and fifth respondents.

9. In the amended application, the wife sought orders as follows:

   2.That there be a further property settlement in such terms as the Court thinks fit and the wife be excused from particularising her claim further until the Respondents have provided full disclosure.

   3.Such further or other orders as the Court deems appropriate.

10. At a registrar’s directions hearing on 2 February 2010 which was the next court event, counsel appeared on behalf of the second, third and fourth respondents.  There was no appearance for the fifth respondent although it seems common ground that the husband is a director of that entity along with his partner. 

11. In addition to counsel for those respondents, counsel appeared for the wife and the husband appeared in person. 

12. I was told by counsel for the three respondents that there was opposition to having been joined by them. 

13. Registrar Mestrovic on 2 February 2010 made the following orders:

    2.That all outstanding applications be adjourned for mention before the Honourable Justice Cronin on 19 April 2010 at 10.00am for the purpose of being listed for a final hearing.

    …

    5.The husband and wife shall issue any notice pursuant to Rules 13.08 or 13.09 on or before 16 February 2010.

    …

    10.That on or before 28 February 2010 the wife file and serve an interim application setting out the relief sought by her against the second and third and fourth respondents together with any affidavits in support.

    11.That on or before 14 March 2010 the husband file and serve any response to the wife’s application together with any affidavits upon which he seeks to rely.

    12.That on or before 7 April 2010 the second, third and fourth respondents file and serve any response together with any affidavits upon which they seek to rely.

    13.That the question of the costs of this day of the wife and the second, third and fourth respondents be reserved to 19 April 2010.

14. On 1 March 2010, the wife filed an affidavit.  She said that P Pty Ltd was a company commenced by the husband in early 1994 and that the members of the husband’s family became involved in about 1996.  Importantly, she said that P Pty Ltd was the trustee of the P Investment Trust.  She said that the husband and his brother were directors of P Pty Ltd and that they each held six of twelve ordinary shares and were the joint appointors of the P Investment Trust. 

15. In her affidavit, the wife said that in 2002 E Pty Ltd was registered with the ASIC and that the husband and his brother were the directors of the company each having 50 per cent of the shareholdings.  E Pty Ltd is the trustee of the J Investment Trust and the husband and his brother are the joint appointors.

16. The wife then said that N Industries Pty Ltd was registered with the ASIC in 2002 and the husband and his brother were directors.  She said the shareholders of N Industries were P Pty Ltd, E Pty Ltd and unrelated third parties.

17. The wife’s affidavit then referred to C Livestock Pty Ltd which was registered in 2005.  She said that C Livestock was the trustee of the C Livestock Unit Trust.  She said the husband and his partner Ms L were the directors.  She said that the husband owned 50 per cent of the shareholding and the remainder was owned by G Pty Ltd.  She said that C Livestock was the trustee of the C Livestock Unit Trust and that the units were held as to G Pty Ltd 50 per cent and E Pty Ltd as to 50 per cent.  On the same day that the wife’s affidavit was filed, she also filed an affidavit by Mr LN who is a valuer employed by S Chartered Accountants.  Mr LN valued the various entities.  As to C Livestock, he pointed to the fact that … Pty Ltd (presumably the same as G Pty Ltd) held its units as trustee for the H Trust and E Pty Ltd held its units as trustee for the J Investment Trust.  He said however that on his calculations, there was no value in C Livestock because the appropriate methodology was the net asset backing and on the basis of the balance sheet, it was in a negative position.  That however depended upon loans owed by the corporate entity.  There are two loans.  One of them is to the P Investment Trust the trustee of which, is E Pty Ltd.  Counsel for E Pty Ltd indicated that the debt would be pursued.  The other debt seems to relate to a man who was not a party to the proceedings and his desire to recover his money was unknown.

18. In her affidavit, the wife said that she was pursuing an order in terms of the application that she filed on the same day.

19. On 1 March 2010, the wife filed an application in a case as she was ordered by the registrar.  In that application she sought the following:

    That the second, third, fourth and fifthnamed respondents do all acts and things and sign all documents necessary:

    (a)to effect any transfer of shares or other assets of the second, third, fourth or fifthnamed respondents to the Applicant or such other person as this Honourable Court may order so as to give effect to any Orders for a property adjustment made by this Honourable Court;

    (b)to sell any shares or other assets of the second, third, fourth or fifthnamed respondents as may be ordered by this Honourable Court.

20. On 12 March 2010, the husband sought an order in identical terms to that of the wife.  In his affidavit in support of that response, he said that P Pty Ltd was the trustee of the P Investment Trust and that he was in dispute with his brother and his brother’s wife because they had locked himself and his parents out the company in May 2009.  He said the situation continued to that time.

21. In his affidavit, the husband said that his brother and sister in law had ceased to operate E Pty Ltd and he had no records for the last financial year.  He said that there were winding up proceedings in respect of N Industries.  In respect of C Livestock, he confirmed the details set out in the wife’s affidavit.

22. On 13 April 2010, the wife filed a further amended application for final orders in which she repeated the orders sought in her interim application.  She then sought an order that:

    Such further order or orders as this Honourable Court may consider proper, including an order pursuant to ss 80 and 81 of the Family Law Act 1975 so as to do justice and equity between the husband and the wife.

23. On the same day, 13 April 2010, D Cule who is the husband’s brother filed an affidavit on behalf of the second, third and fourth respondents.  He explained in detail in that affidavit the various structures.

24. Counsel for the third party submitted that the dispute from his client’s point of view was their very joinder as parties.  He submitted, and I agree, the orders sought by the wife could not give effect to any settlement in the format as drawn.

25. It is quite clear from the evidence that the second, third and fourth respondents are trustees and their actions governed by trust deeds.  No material was filed by the husband or the wife in respect of the capacity of the trustees to make the orders sought.

26. The second, third and fourth respondents dispute the entitlements of the husband and the wife.  They go further and allege that the husband has taken and/or retained moneys to which he was not entitled and that issue will be the subject of litigation.

27. There is no material before the Court which would enable a trial judge to call upon the second, third, fourth or fifth named respondents to answer the allegations of the wife let alone the husband.  For example, it was suggested by counsel for the wife that what was being pursued was a transfer of shares equivalent to the wife’s determined interest such that she could recover the amount to which she was entitled.  No material was presented to show that in its capacity as a trustee, P Pty Ltd could make decisions along the lines pursued by the wife if such an order was made because the husband and his brother each have one half of the shareholding and are joint appointors.  Much more careful thought needs to be applied as to how the wife could obtain any entitlement out of the trust bearing in mind that such an order might also give rise to significant taxation liabilities if distributions were made from the trust as would seem to have been anticipated but not necessarily stated by the wife.  Obviously, any restructuring of the trustees control would have serious implications for the beneficiaries of the relevant family trusts.  They would need to be heard in relation to the due administration of the trust particularly if there was an order that altered the entitlements of the various family trusts.  It is also obviously a problem where the trusts conduct a business.

28. C Livestock as the fifth respondent has nothing to do with the other respondents.  Albeit that the husband is a 50 per cent holder of units, there seems to be a 2009 transfer of units to the husband’s partner.  It would seem therefore that the husband and his partner have control of the trust in their capacities as directors of the trustee company even if they have equal units. 

29. Importantly, the second to the fifth respondents were joined and the jurisdiction to make orders against any of them remains unclear. 

30. Counsel for the second, third and fourth respondents relied upon Rule 10.12 of the Family Law Rules 2004 which provides for the Court to make summary orders in circumstances where the Court has no jurisdiction or there is no reasonable likelihood of success. Other provisions in the rule are not applicable.

31. It has sometimes been said that because this Court is not one that uses pleadings, there must be some evidence of a narrative or descriptive nature which would enable a third party to understand the nature of the cause of action against it.  (See Gould v Gould; Swire Investments Limited (1993) FLC 92-434).

32. To enable the Court to make orders against the respondents, the claim of the wife, and for that matter, the husband, must be either a matrimonial cause or one upon which the accrued jurisdiction of the Court is invoked.  Part VIIIIAA provides in s 90AE(3)(a) that a party must show that the making of the order is reasonably necessary, or reasonably appropriate and adapted to effect a division of property between the parties to the marriage.

33. There is nothing in the affidavit of the wife or for that matter, the husband that would enable me to be satisfied that the power under Part VIIIAA is to be invoked and even if it were, how the orders in the terms as currently drawn as against the third parties could be effective to divide the property of the husband and the wife.  The powers in Part VIIIAA do not enable the Court to create property.

34. In B Pty Ltd and Ors and K and Anor (2008) FamCAFC 113 the Full Court said:

    52.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.

    …

    63.In our view, the correct conclusion was that, as the wife set out her proposed claim, she did not show that the power conferred by s 90AE could arguably be engaged.  Any order made pursuant to s 90AE(2)(b) must be for the purpose of effecting a division of property between the parties.  The order that the wife proposed was for the purpose of increasing the property of the parties, by an unknown amount and on unknown principles.

35. Based upon the evidence of both the husband and the wife, it is difficult to identify what material facts give rise to a cause of action that would lead this Court to make an order that the trustees of the discretionary trusts distribute funds as the wife would have it.  Without some particularity, the claim against each of the respondents other than the husband cannot be comprehensively answered.

36. Because it is not appropriate to simply join parties who are not parties to a marriage without the cause of action being set out, the second, third, fourth and fifth respondents must be discharged from the proceedings.

37. It is conceivable in the circumstances that a properly drawn application may make the position much clearer so that precise orders can be drawn against parties other than the husband and wife.  For that reason, I propose to adjourn the proceedings until July to allow the wife and to the extent necessary, the husband, to work out exactly what they want to do and if necessary, to file proper applications.

38. The second, third and fourth respondents sought costs.  Counsel for them sought that they be granted orders for $5000 on the occasion before the registrar when costs were reserved and $10,000 before me.  Those sums were estimated by counsel based upon an indemnity costs order.

39. Section 117 of the Family Law Act 1975 (Cth) (“the Act”) refers to each party to the proceedings bearing their own costs. Until the discharge of the respondents, they are subject to that provision. To depart from the requirement that each party pays their own costs, the Court has to be satisfied that there are circumstances justifying that departure. If that situation can be shown, then the provisions of s 117(2A) apply.

40. Counsel for the respondents referred to pointed to the fact that when they were brought before the registrar in February 2010, it was made clear to both the husband and the wife of their opposition to being parties.  Notwithstanding that opposition, both the husband and the wife expanded their respective orders.  To that extent, albeit may have been the wife who was the instigator of the action against the respondents, the husband joined with her.

41. At all times, the second, third and fourth respondents have pointed to the problems facing the applicant and the husband.  Albeit that the problems may arise from the drafting, it was apparently made clear that jurisdiction was to be argued.  In those circumstances, there is justification for an order for costs against both the husband and the wife.

42. Both the husband and counsel for the wife indicated that the financial circumstances were modest and that the second, third and fourth respondents were effectively holding the significant portion of the money that the parties themselves were pursuing.  That does not seem to me to be a justification for inappropriate joinder particularly having regard to what the Full Court said as I have mentioned above.  The second, third and fourth respondents assert that they have incurred $15,000 worth of legal costs but in the circumstances, the conduct of the husband and the wife could not be described as a flagrant disregard of the interests of those parties nor vexatious.  This is not a case in which I could justify making an order for indemnity costs.

43. Sadly, the second, third and fourth respondents will be out of pocket predominantly as a result of the poorly drawn and ill-considered application of the husband and the wife. 

44. Counsel for the wife indicated that I should reserve the costs.  I see no reason to do that in this case because the wife may never bring back an application against those parties although that seems unlikely. 

45. This is a case in which the second, third and fourth respondents are entitled to their costs. 

46. As to the quantum of the costs, I take into account that on each of the two occasions before the Court, counsel was engaged and was properly instructed. The scale in the schedule attached to the Family Law Rules 2004 fixes a range for junior counsel. I propose to make the order at the top end of that range having regard to the complexity of the nature of the dispute and the legal implications for the orders involved. In those circumstances, I propose to order that counsel’s fees be fixed in a total of $2400.

1. Doing the best I can to avoid a taxation at further expense to the parties, but using the same schedule to the Family Law Rules, I propose to allow the solicitor for the said parties $1600 calculated on the basis of just over eight hours of work.

2. In the circumstances, the orders are set out at the start of these reasons.

I certify that the preceding Forty Eight (48) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  21 April 2010