Darcy & Darcy (No 2)

[2023] FedCFamC1F 923

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Darcy & Darcy (No 2) [2023] FedCFamC1F 923

File number(s):

SYC 7201 of 2020

Judgment of:

SCHONELL J

Date of judgment:

27 October 2023

Catchwords:

FAMILY LAW – PRACTICE AND PROCEDURE – Joinder – Where the wife sought to join the husband’s mother and late father’s estate – Where the wife contended that loan agreements between the husband and his parents are shams – Where the husband and putative respondents opposed the joinder – Where the wife seeks orders that affect the interests of the putative respondents – Where the Court is of the view that joinder is therefore necessary to determine the matters in dispute – Orders made for joinder of the putative respondents.    

Legislation:

Family Law Act 1975 (Cth) ss 79, 106B

Family Law Rules 2004 (Cth)

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 3.01, 3.03

Cases cited:

B Pty Ltd and Ors & K and Anor (2008) FLC 93-380; [2008] FamCAFC 113

Hancock Family Memorial Foundation Ltd v Fieldhouse (No 3) [2010] WASC 223

Riemann & Riemann and Ors (No 3) [2017] FamCA 911

Vadisanis & Vadisanis and Anor (2014) FLC 93-593; [2014] FamCAFC 97

Victoria v Sutton (1998) 195 CLR 291; [1998] HCA 56

Wayne v Dillon (2008) 40 Fam LR 543; [2008] FamCAFC 204

Division:

Division 1 First Instance

Number of paragraphs:

43

Date of hearing:

20 October 2023

Place:

Sydney

Counsel for the Applicant:

Mr Bell

Solicitor for the Applicant:

Horowitz & Bilinsky

Counsel for the First Respondent:

Dr Barnett SC

Solicitor for the First Respondent:

Southern Waters Legal

Counsel for the Putative Second and Third Respondents:

Ms Bailey

Solicitor for the Putative Second and Third Respondents:

HWL Ebsworth Lawyers

The Independent Children’s Lawyer 

Did not participate

ORDERS

SYC 7201 of 2020

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS DARCY

Applicant

AND:

MR DARCY

First Respondent

MS B DARCY

Putative Second Respondent

ESTATE OF THE LATE MR C DARCY

Putative Third Respondent

INDEPENDENT CHILDREN'S LAWYER

ORDER MADE BY:	SCHONELL J
DATE OF ORDER:	27 OCTOBER 2023

THE COURT ORDERS THAT:

1.Pursuant to r 3.03(4) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), the applicant wife is granted leave to join Ms B Darcy and the Estate of the late Mr C Darcy (the putative second and third respondents) to the proceedings.

2.Ms B Darcy and the Estate of the late Mr C Darcy are joined to the proceedings.

Note:   The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Darcy & Darcy has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

REASONS FOR JUDGMENT

SCHONELL J:

1. By order made 21 September 2023, the Court listed for hearing on 20 October 2023 the joinder application set out in Annexure B to the applicant wife’s (“the wife’s”) Amended Response to Initiating Application filed 26 June 2023. By that application, the wife sought to join to the proceedings Ms B Darcy (the husband’s mother who is the putative second respondent) and the Estate of the late Mr C Darcy (the estate of the husband’s late father who is the putative third respondent) (collectively “the putative respondents”). On the hearing of the application, the husband and putative respondents appeared opposing the making of the orders.

2. The wife relied upon the following documents:

   (1)Amended Response to Initiating Application filed 26 June 2023;

   (2)Affidavit of wife filed 10 October 2023;

   (3)Affidavit of wife filed 20 April 2023;

   (4)Points of Claim of wife; and

   (5)Case Outline document.

3. The husband relied upon the following documents:

   (1)Further Further Amended Initiating Application filed 18 October 2023;

   (2)Affidavit of husband filed 18 October 2023; and

   (3)Case Outline document.

4. The putative respondents relied upon the following documents:

   (1)Points of Defence of the husband’s mother; and

   (2)Case Outline document.

5. Various documents were also tendered.

   BACKGROUND

6. The wife was born in 1975 and is currently 47 years of age.

7. The husband was born in 1973 and is currently 50 years of age.

8. The parties commenced cohabitation in 2006, married in 2010 and separated on a final basis on 4 August 2020.

9. The parties have two children together who are aged 14 and 11 years.

10. In 1956, the company D Pty Ltd was registered. The husband contended that he has never been a director of this company. He said that his mother is a shareholder and one of two directors of this company.

11. In 1991, the company D1 Pty Ltd was registered. The husband contended that he was a director of this company between 2000 and 2003. The husband deposed that his mother is the sole shareholder and one of two directors of this company. 

12. In or around 2000, the husband contended that he commenced employment as a general manager at D Pty Ltd. The wife said he commenced as the general manager in 2008.

13. The wife contended that the husband has an active role in the business and that throughout the relationship he would make comments to the effect of the companies being his.

14. In 2008, the husband deposed that he became the director of D2 Pty Ltd.

15. In 2013, the husband purchased a property at H Street for over $2,000,000. To fund this purchase, the husband’s parents loaned him the sum of $1,000,000. The wife deposed that the husband’s parents did not say that the money advanced was a loan.

16. On 1 September 2014, the husband and his parents entered into a loan agreement in respect of an advance provided to the husband in the sum of $250,000. The wife disputes this agreement.

17. On 25 March 2015, the husband and his parents entered into another loan agreement in relation to an advance provided to the husband in the sum of $1,264,560. The wife also disputes this agreement.

18. In 2019, the husband was involved in a motor vehicle accident and sustained significant injuries. He deposed that he is still the general manager of D Pty Ltd but due to his health he is only able to two and a half hours each day.

19. Following the parties’ separation, in December 2020, the husband’s parents registered a caveat over the H Street property. 

    APPLICABLE LAW – JOINDER

20. Section 79(10)(b) of the Family Law Act 1975 (Cth) (“the Act”) provides that any other person whose interests would be affected by the making of an order is entitled to be joined to the proceedings.

21. The Act reflects what McHugh J observed in Victoria v Sutton (1998) 195 CLR 291 that:

    77.The rules of natural justice require that, before a court makes an order that may affect the rights or interests of a person, that person should be given an opportunity to contest the making of that order. Because that is so, it is the invariable practice of the courts to require such a person to be joined as a party if there is an arguable possibility that he or she may be affected by the making of the order. …

    (Footnote omitted)

22. Rule 3.01 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) provides:

    3.01     Necessary parties

    A person whose rights may be directly affected by an issue in a proceeding, and whose participation as a party is necessary for the court to determine all issues in dispute in the proceeding, must be included as a party to the proceeding.

23. While r 3.03(4) provides that a party who seeks to join someone to the proceedings after the first Court date must seek leave to do so.

24. In Wayne v Dillon (2008) 40 Fam LR 543 (“Wayne v Dillion”), Warnick J observed in respect of the old Family Law Rules 2004 (Cth) that “necessary” meant:

    18. … something more than “useful” or “expeditious”. In my view, if there are available alternative means to joinder to the substantive proceedings, of obtaining from a third person or someone already a party what is needed to allow an applicant for joinder to establish an identified “case”, joinder is unlikely to be “necessary”.

    19. However, if a cause of action, recognisable at law, against a “third person” is particularised, then it is at least highly likely that joinder will be “necessary for the court to completely and finally determine all matters in dispute”. …

25. The Full Court in B Pty Ltd and Ors & K and Anor (2008) FLC 93-380 held as follows:

    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.

26. In Riemann & Riemann and Ors (No. 3) [2017] FamCA 911 at [37], McClelland J (as his Honour then was) cited with approval the judgment of Le Miere J in Hancock Family Memorial Foundation Ltd v Fieldhouse (No 3) [2010] WASC 223 where Le Miere J observed as follows:

    27.The applicant on a joinder application must show that there is an arguable case sufficient to resist the entry of summary judgment by the parties sought to be joined: Universal Music Australia Pty Ltd v Cooper [2004] FCA 78 [6] (Tamberlin J). The test is that stated by Barwick CJ at 128 - 129 in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125: Universal Music Australia Pty Ltd v Cooper [7] (Tamberlin J); Review Australia Pty Ltd v Red Berry Enterprises Pty Ltd [2003] FCA 1009 [5] (Heerey J). It would be futile to order that a person be joined as a defendant if the material before the court disclosed that if the person, having been joined as a defendant, applied for summary judgment the application would succeed.

    SUBMISSIONS OF THE WIFE

27. The joinder application as best I can ascertain seems to be informed by two broad contentions; firstly, that various loan agreements entered into between the husband and his parents in around 2014 and 2015 are shams and secondly, that the husband is in some way or other, imprecisely articulated, either the owner of various companies owned and controlled by his parents or the owner of businesses owned by those companies. The lack of precision about the contention arises as a consequence of the way the matter is formulated in various documents in the wife’s case.

28. The wife’s counsel submitted that two loan agreements entered between the husband and his parents in around 2014 and 2015 are shams. A mortgage and subsequent caveat signed at a time after separation are said to be demonstrative of the sham. Reliance was placed on the wife’s Points of Claim and in particular, paragraphs 16 to 38. In essence, it was submitted that representations were made to the wife that the former matrimonial home was debt free and that funds advanced by the husband’s parents to assist in the purchase were a gift. The wife contended in the Points of Claim that similar representations were made by the husband’s parents. The Points of Claim states that the loans are statute barred.

29. Documents tendered by the wife’s counsel took the arguable case no further. Various financial accounts were tendered but no cogent submission was made as to their relevance. Likewise, a ledger for the company D Pty Ltd was relied upon. Beyond demonstrating significant benefits, the husband has received from his parents, it remains unclear what is sought to be contended by its tender. The translation of such benefits into ownership is not immediately apparent beyond hyperbole.

    SUBMISSIONS OF THE HUSBAND

30. The husband submitted that the wife failed to make a case that joinder is necessary. His senior counsel submitted that the assertions that the loans are statute barred has no foundation (see Vadisanis & Vadisanis and Anor (2014) FLC 93-593 at [89]). Nor, so the submission went, is the wife’s claim defeated such that an order would be made under s 106B. The husband’s Case Outline submitted in the following terms:

    22. The Husband retains the legal interest in the former matrimonial home. It has been estimated to be worth $5,000,000. In the event the Court finds that the loans were entered into to defeat the Wife’s claim, noting the difficulty with this proposition given the dates of the loans (1 September 2014, and 25 March 2015) and the date of separation in May 2020 the main asset of the parties remain in the pool.

    23. The factual basis for the making of the orders under s 106B have not been adequately articulated in the statement of claim. This is not taking a technical view of the pleadings but noting that the basis for 106B are not present. She is required to inform the proposed respondents of the issues and she is required to disclose an arguable case of the case the proposed respondents must meet. This has not occurred. It does not appear that she contests the funds that are subject to the loan documents have not been provided but that the categorisation of the monies as loans rather than gifts is in issue. This is a common complaint made by spouses in the jurisdiction and it does not follow that the provision of funds by parents of a spouse party necessitates their joinder where there is a dispute as to the characterisation of those funds. Particularly where the asset bought with those funds has appreciated in value.

    …

    25. The wife asserts in her statement of claim at items 52 to 56 that the Husband has represented that he is the owner or director of the companies. Even if the points at 52 or 56 these are inadequate contentions to support the Court finding that the Husband is the owner or director of the companies.

    26. She provides inadequate basis for the Court to find in law or in equity that the Husband owns the companies on a sufficient basis for this Court to conclude that the value of the companies should be included as an asset of the Husband. 

    SUBMISSIONS OF THE PUTATIVE RESPONDENTS

31. Counsel for the putative respondents submitted that as presently constructed, the wife’s Amended Response by the orders sought dispels any notion that the putative respondents are necessary parties. It is submitted that, given the wife seeks indemnities in relation to the various loans, it is not necessary that they be joined to the proceedings. The written submissions in the Case Outline contended as follows:

    9.        The [Points of Claim]:

    9.1. does not provide any basis for the serious allegation of a “sham” or any pleading as to why any “arrangements” (to which the Wife is a not a party) would be unenforceable.

    9.2. does not engage with the requirements of s 106B of the Act, including how any “instrument or disposition” (which is itself not articulated) was made or proposed to be made to defeat an existing or anticipated order in the proceeding, or which is likely to defeat any such order – particularly in light of the orders sought by the Wife at paragraph 26 on page 6 of the Amended Response as noted above.

    10. The affidavit filed by the Wife on 10 October 2023 (Wife’s October Affidavit) similarly does not assist in demonstrating that, if proved, the law arguably provides the relief sought against the Affected Parties such that they should be joined: see B Pty Ltd v K [2008] FamCAFC 113 per Warnick JJ at [52].

    11. Indeed, of the 31 numbered paragraphs, only two appear relevant to the Joinder:

    11.1. Paragraph 6, which baldly states, in inadmissible form, that the Affected Parties “are purported lenders to [Mr Darcy] in a transaction I submit is a sham.”

    11.2. Paragraph 21, which contains a series of disjointed propositions about what the Wife says she knew, or did not know, at the time the Husband purchased the Property.

    12. Neither paragraph provides any lucidity as to the evidentiary or legal basis relied upon by the Wife for the Joinder.

    …

    22. Finally, it is submitted that the Court should allow little weight to propositions in the [Points of Claim] that any monies provided by the Affected Parties were gifts, and are not recoverable, including because they are subject to “sham” or “unenforceable” arrangements, in circumstances where only six months earlier, in the Wife’s February Affidavit, the Wife deposed, inter alia:

    22.1. “I do not know what the actual source of finance was including what, if any, role his parents save for what they and [Mr Darcy] said” [29]

    22.2. “I am in no position to admit or respond to any contention about [Ms B Darcy] and [Mr C Darcy’s] role” [36]

    23. There is nothing in the Wife’s October Affidavit that suggests the above position has changed such that the Wife might now have a valid basis to mount an attack against the Affected Parties that warrants their joinder. There is nothing in the Wife’s material that comes close to suggesting a Court would be minded to grant an injunction pursuant to s 68B of the Act, preventing [Ms B Darcy] from approaching her grandchildren.

32. Counsel for the putative respondents also submitted that the arguments marshalled by the wife that the loans are statute barred has no basis whatsoever.

    DISCUSSION

33. The task of identifying the wife’s arguable case was obscured by the manner in which the case was presented, and the documents prepared in aid of it. The Case Outline was largely irrelevant, referring to many matters which were not apposite to the issue listed for hearing. On the joinder issue, it stated:

    19.The role of [Ms B Darcy] appears to be a shield for the husband's nondisclosure and the theme of “the wife can just go and subpoena the companies” unproductive financially and psychologically exhausting and squandering Court resources.

    20.It is on the material clear that she is closely involved in the issues, the valuation, the conduct of the companies and the transactions are clearly relevant.

    21.On her instructions a caveat was lodged over the home. The husband has not sought to lapse it. The picture concerning transactions involving them remains unclear. On the last occasion it was submitted for the Wife a plausible scenario that financial assistance to the husband was in whole or in part from the companies.

    None of these contentions support joinder.

34. The wife’s Amended Response seeks (excluding parenting orders) a sale of the former matrimonial home with the wife to receive 75 per cent of the proceeds exclusive of any mortgage liability. How this could be achieved in circumstances where there is a registered mortgage to a bank is unclear. The wife also seeks 19 other orders. The orders are not numbered consecutively and include a series of declarations which questionably are incapable of being made.

35. The wife also seeks orders pursuant to s 106B and relevantly to the present application, she seeks orders expressed in the following terms:

    12. Further or alternately, DECLARE that a purported loan agreement of 25 March 2015 and any variation thereof is unenforceable by virtue of the Limitations Act and that no monies are recoverable by [Ms B Darcy] or the estate of the late [Mr C Darcy].

    13. Further or alternatively ORDER pursuant to section 106B Family Law Act “the Act” setting aside any such instrument or dispositions.

    14. Further or alternately, DECLARE that any money advanced by [Ms B Darcy] and or the late [Mr C Darcy] were gifts to both the Husband and Wife.

    15. Further or alternately, DECLARE that a purported unregistered mortgage, the subject of caveat […], registered on 11 December 2020, claiming an equitable interest in land pursuant to the unregistered mortgage, is void and unenforceable.

    16. Further or alternately DECLARE the purported mortgage stand-alone arrangements asserted by the Husband in the within proceedings to his parents are a sham and/or unenforceable or statute barred.

    17. Further or alternatively ORDER pursuant to section 106B Family Law Act “the Act” setting aside any such instrument or dispositions.

1. A series of orders are also sought in relation to the two companies, one of which was incorporated some 17 years before the husband’s birth. In relation to these companies, orders are sought as follows:

   20. That such further Orders be made in relation to the Husband’s interests, entitlements or resources in or as may relate to any corporate entity, including [D Pty Ltd] and [D1 Pty Ltd] to give practical effect and efficacy to these orders

   21. FURTHER or alternately DECLARE that the Husband is and was, at all material times relevant to the proceedings, the owner or constructive owner of the companies ALTERNATELY that he is and was, at all material times, the owner on such terms and conditions including but not only relevant terms as the court may think fit.

   22. FURTHER or alternately DECLARE that the Husband is and was, at all material times relevant to the proceedings, a de facto director, or in the alternative, a shadow director of [D Pty Ltd] and [D1 Pty Ltd]. 

2. The husband’s counsel conceded that the Amended Response needs further amendment. The necessity for same is obvious.

3. The wife’s evidence in her affidavit filed 20 April 2023 is largely irrelevant to the application. It is a wide-ranging complaint about non-disclosure and otherwise is largely submissions which were of little evidentiary value. While the affidavit refers to various loans the husband has received from the companies, the subject loan agreements are not with the companies but rather the husband’s parents. The highest that affidavit gets to anything relevant to this application is an assertion as follows:

   28. A caveat registered against [H Street] refers to a mortgage. H&B wrote to HD on 24 March 2023 requesting that the identity of any solicitor who have independent legal advice be disclosed. There has been response. A copy of H&B’s letter is a “[MD] 24”. So far as I’m aware, no records have been disclosed which would indicate the source of funds, if any were made available by any relevant entity or person in these transactions, whether or not as principal or partial repayment or otherwise. As far as I’m aware neither [Mr Darcy] nor [Ms B Darcy] has actually stated whether any money was actually transferred except [Mr Darcy’s] reference to loans for the purchase of [H Street] in his affidavit of 29 January 2021. No statement showing any balance, interest or payments made against the alleged mortgage has been provided.

4. The affidavit filed 10 October 2023 is only slightly more informative, referring to various assertions by the husband to the wife that “the businesses are really mine” and that the husband has acted in a way that was said to be consistent with such an assertion. On the issue of sham, the affidavit contains the following contentions:

   21. When [H Street] was bought In […] 2013 [Mr Darcy] said words to the effect “My parents are going to give us the money so that we can have a good life.” At the time I thanked [Ms B Darcy] and [Mr C Darcy]. [Ms B Darcy] referred to ‘giving money’. There was no reference to me at the time, or since, to any loan, repayment or obligation. I also thanked [Mr C Darcy] at the same timed and he did not contradict [Ms B Darcy]. [Ms B Darcy] also said, “If you subdivide and sell the second block you will be debt free and have a new home”. [Mr Darcy] and my plan was to subdivide and build a […] home to live in - selling the rear block to pay for construction of the [home].” Subdivision was approved in […] 2020.

   22. When [H Street] and a previous property were bought by [Mr Darcy] he said following discussion that my name was not included on title because he said he was afraid and had been advised my former husband [Mr J] may make a claim if I was on title. Although I have acknowledged [Mr Darcy] assisted me in my dealings with [Mr J], I was surprised [Mr Darcy] chose [Mr J’s] Solicitor [Ms K] to act now. I did not then think it was necessary to seek any independent legal advice as [Mr Darcy] said he had spoken to a solicitor, and I believed him. [Mr Darcy] insisted his name be sole owner, but [H Street] was nevertheless ‘ours’ and he wanted to protect me from claims.

5. As said earlier, the presentation and preparation of the wife’s case has significant shortcomings. The wife has incurred legal fees exceeding $450,000 and the parties are no closer to a resolution on any of the contended issues. In circumstances where I am satisfied that this matter needs significant trial management, I have directed that the parties file their trial affidavits. Only upon the filing of evidence will clearer articulation of the contentious issues become apparent.

6. On this application, I am not determining the final hearing nor making findings that the wife has discharged the onus of proof that falls upon her to establish her case. I am merely ascertaining whether she, on the material before me, has articulated an arguable case sufficient to establish the joinder.

7. The wife contended that there were representations made by the husband and his parents that funds advanced to purchase the former matrimonial home were in fact gifts not loans. She seeks relief that affects the interests of the putative respondents. I am satisfied, notwithstanding the reservations expressed earlier, that the joinder is necessary to “completely and finally determine all matters in dispute” (see Wayne v Dillon at [19]). In the event that the wife does not make good her case against the putative respondents, then it is not beyond the realm of imagination to anticipate that costs will become a significant issue.

   CONCLUSION

8. For the above reasons, I am satisfied that orders should be made as sought by the wife.

I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Schonell.

Associate:

Dated:       27 October 2023