Darmody and Sinton and Anor
[2017] FCCA 2238
•8 September 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DARMODY & SINTON & ANOR | [2017] FCCA 2238 |
| Catchwords: FAMILY LAW – De facto property proceedings – joinder of third party – whether joinder of a registered mortgagee is necessary to effect a just and equitable settlement between the parties to a de facto relationship – if not, whether the Respondent ought to indemnify the Applicant against any losses she suffers as a result of defaulting on the mortgage loan. |
| Legislation: Family Law Act 1975 (Cth), ss.114(3), 90AF(1), 90AF(2), 114 Federal Circuit Court Rules 2001, r.11.01 |
| Gee & Luxford & Anor [2015] FCCA 2944 |
| Applicant: | MS DARMODY |
| Respondent: | MR SINTON |
| Proposed Second Respondent: | MR WATSON |
| File Number: | MLC 12526 of 2016 |
| Judgment of: | Judge Small |
| Hearing date: | 7 September 2017 |
| Date of Last Submission: | 7 September 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 8 September 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Byrne |
| Solicitors for the Applicant: | Nicholas P Byrne |
| Counsel for the Respondent: | Mr Salamanca |
| Solicitors for the Respondent: | Stephen Farmer & Associates |
| Counsel for the Proposed Second Respondent: | Mr Laidlaw |
| Solicitors for the Proposed Second Respondent: | Gleeson & Co T/A Moama Law |
ORDERS
The Application in a Case filed 1 August 2017 is dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Darmody & Sinton & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 12526 of 2016
| MS DARMODY |
Applicant
And
| MR SINTON |
Respondent
And
MR WATSON
Proposed Second Respondent
REASONS FOR JUDGMENT
Introduction
These are de facto property settlement proceedings between Ms Darmody (“the Applicant”) and Mr Sinton (“the Respondent”).
On 1 August 2017 the Applicant filed an Application in a Case in which she sought the following orders:
1.Stay of proceedings now proposed by MR WATSON of (omitted) as THIRD PARTY to this application, as a registered mortgagee, to sell property being the residence and property of the APLICANT (sic) situate and known as Property A (sic), pursuant to the claimed rights as mortgagee under an instrument of mortgage registered number (omitted) secured over that property, in respect of the principal sum of $200,000 and interest, until such time as this honourable Court may determine, pending or following the outcome of proceedings brought by the Applicant against the Respondent for a financial settlement.
2.That the Respondent MR SINTON indemnify the Applicant MS DARMODY in respect of all economic losses and damages sustained or now potentially to be suffered by the Applicant, in the event of this honourable Court electing not to grant the stay sought in paragraph no. 1 preceding, arising out of the Applicants (sic) position as a defaulting mortgagor, including any damages sustained as a consequence of the displacement of the applicant and her family arising from the potential loss of her home before hearing of her claim against the Respondent for a financial settlement, being the subject property of the Third Party’s threatened recovery action, including all costs or damages attending such a displacement.
3.An order for costs payable by the Respondent MR SINTON in respect of this further application, earlier Initiating Application in respect of costs previously reserved on 15th March 2017 and any such other alternative orders as the Court may in its discretion deem appropriate.
When that Application came before me for hearing on 7 September 2017, Mr Watson was represented by counsel, who quite properly advised the court that Mr Watson was not a party to the proceedings, and that he did not wish to join the proceedings.
In those circumstances, I allowed counsel for the Applicant to make an oral application that Mr Watson be joined as a party to the proceedings.
The question of whether I should grant that oral application is the major issue before the court at this hearing.
Background to this application
The parties were engaged in a de facto relationship between about 2006 or 2007 and 2015. The actual dates of the relationship are in dispute but that dispute is not relevant to the decision the court must make today.
It is common ground between the parties that at the end of the relationship the Respondent offered to assist the Applicant to buy a property for her and her daughter to live in.
In mid-2015, the Applicant entered into a contract of sale in relation to the property at Property A (“the Property A property”) for $400,000. The Respondent gave her $200,000 towards that purchase.
While the Applicant deposes that she believed that the Respondent would pay the whole of the purchase price, she acknowledges that he gave no undertaking to do so.
The Respondent deposes that he told the Applicant only that he would pay “up to $200,000” to assist the Applicant to purchase a property for her and her daughter to live in.
The Applicant attempted to obtain mortgage finance in order to meet the outstanding $200,000 of the purchase price of the property, but found that, because of certain business debts relating to companies of which she had been a director during the relationship, her credit rating did not allow her to obtain finance from any of the major banks.
The Respondent then approached Mr Watson, who was a friend of his, and asked if he would be prepared to advance the sum of $200,000 to the Applicant so that she could complete the purchase of the Property A property. Mr Watson said he would think about it, and after being approached again some days later by the Respondent, he agreed to advance the monies to the Applicant subject to a mortgage over the Property A property.
Mortgage documents were then prepared (apparently by the Applicant’s conveyancing lawyers) and the Applicant and Mr Watson signed those documents, which provided for him to advance the sum of $200,000 to the Applicant at an annual interest rate of 2.5%, with the full amount plus interest to be repaid by 13 July 2017.
The mortgage was registered in August 2015.
In December 2016, the Applicant apparently came to believe that there had been something untoward in the way that she had obtained the mortgage loan because of the friendship between Mr Watson and the Respondent, and she simply ceased to make any repayments in relation to it. I note that she filed her Initiating Application in these proceedings on 21 December 2016.
It does not appear that the Applicant has made any further enquiries since 2015 as to whether she is now eligible to obtain mortgage finance from a bank or other financial institution.
On 23 June 2017, Mr Watson issued a Notice to Pay which was sent to the Applicant by registered mail. She deposes to not having received that Notice to Pay until 10 July 2017, but that is neither here nor there in relation to the issue before the court today except that the Notice was issued about three weeks before the debt was due to be paid in full.
Correspondence between the solicitor for the Applicant and Mr Watson’s solicitors failed to resolve the issue, and a second Notice to Pay and a Demand for Possession were issued on 28 July 2017.
The Applicant then issued her Application in a Case on 1 August 2017.
The Applicant seeks orders today that Mr Watson be joined to the proceedings and that he be enjoined from pursuing his rights under the mortgage, and, that if she is unsuccessful in that application, that I make an order requiring the Respondent to indemnify her against any losses she may incur from any proceedings Mr Watson might take against her in relation to the mortgage.
The court heard submissions from counsel for the Applicant, counsel for the Respondent, and counsel for Mr Watson.
The submissions
Mr Byrne, for the Applicant, made submissions based on affidavit material prepared by him and sworn by his client. He submitted that because Mr Watson and the Respondent are friends, and the action of Mr Watson in seeking to enforce the terms and conditions of the mortgage would put financial pressure on the Applicant, Mr Watson ought to be joined to the proceedings.
It was his submission that his client believed that the Respondent had deliberately, and in bad faith, used Mr Watson’s position as mortgagee to place financial pressure on the Applicant and by inference, to punish her or to influence the outcome of these proceedings.
Mr Byrne did not characterise the situation as a conspiracy between Mr Watson and the Respondent, but simply as one where the Respondent had used Mr Watson to further his own cause.
He submitted that the situation in which his client finds herself is different from that of a mortgagor whose mortgagee is a bank or other financial institution because of the relationship between the mortgagee and the Respondent.
Mr Salamanca, for the Respondent, objected to many of the submissions of Mr Byrne because they were not all based on evidence before the court in the form of the Applicant’s affidavit material, and that is true.
There is no evidence in the Applicant’s material, said Mr Salamanca, to support the Applicant’s suggestion that there had either been a conspiracy between Mr Watson and the Respondent, or that Mr Watson had unwittingly been used by the Respondent in relation to his issuing the Notices to Pay and Demand for Possession. I must say that upon reading the Applicant’s affidavit material again I have to agree with that submission.
Mr Laidlaw, for Mr Watson, submitted that his client ought not to be joined to the proceedings, nor enjoined from prosecuting his rights under the mortgage.
He too objected to the suggestion that there had been any kind of collusion between his client and the Respondent, and based his submissions on the provisions of the Family Law Act 1979 (Cth) (“the Act”).
There were, in essence, two limbs to Mr Laidlaw’s argument.
First, he argued that for a party to be joined to proceedings, their participation in the proceedings must be necessary for the court to finally determine the overall dispute in the proceedings.
Mr Laidlaw based that argument first on r.11.01 of the Federal Circuit Court Rules 2001, the relevant portion of which reads as follows:
(1)Subject to any order of the Court, a person whose participation is necessary for the Court to completely and finally determine all matters in dispute in a proceeding must be included as a party in the proceeding.
Mr Laidlaw then referred me to a decision of my brother Judge Scarlett in Gee & Luxford & Anor [2015] FCCA 2944, who in turn referred to a decision of Warnick J in Wayne & Dillon & Anor [2008] FamCAFC 204 where His Honour said the following at paragraphs 18 and 19:
18. The word “necessary” in rule 11.01 must mean 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 established 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 that least highly likely that joinder will be “necessary for the court to completely and finally determine all matters in dispute”.
In the current proceedings I cannot see how it would be necessary to join Mr Watson to the proceedings simply because he is the Applicant’s mortgagee and is attempting to enforce the terms of his mortgage. The fact that he is a friend of the Respondent is, in my view, totally irrelevant to the matters in dispute in these proceedings.
As a matter of law, I cannot see how Mr Watson’s position as mortgagee is any different to that of a commercial financial institution seeking to enforce the terms of a registered mortgage. Even Mr Byrne conceded that it would be an extraordinary order that joined a bank to private proceedings in which their only role was as a party’s mortgagee.
As I said during the hearing, joining Mr Watson and then enjoining him from pursuing his rights under the mortgage until the outcome of the Applicant’s Initiating Application were known, would certainly be in the interests of the Applicant. She would be able to remain in her home with her teenage daughter until her financial future was more certain, and as I said during submissions, I have some sympathy with the somewhat precarious situation in which she finds herself.
However, I cannot find on the evidence that it is necessary for Mr Watson to be joined in order for me to able to make orders for a property settlement between the Applicant and the Respondent.
In those circumstances I will dismiss the oral application to join Mr Watson to the proceedings.
The question then becomes whether the court ought to issue an injunction against Mr Watson, as a third party, preventing him from pursuing his rights under the mortgage. Submissions in relation to that question became the second limb of Mr Laidlaw’s argument.
There is little doubt that the court has the power to make an injunction against a third party to proceedings. That power is set out in s.114(3) of the Act which reads:
A court exercising jurisdiction under this Act in proceedings other than proceedings to which subsection (1) applies [and I note that subsection (1) applies to the parties of a marriage and therefore does not apply in this case ] may grant an injunction, by interlocutory order or otherwise (including an injunction in aid of the enforcement of a decree), in any case in which it appears to the court to be just or convenient to do so and either unconditionally or upon such terms and conditions as the court considers appropriate.
Section 90AF(1) & (2) of the Act state specifically that the Court may make an order or injunction under s.114 binding a third party.
However, subsections (1) and (2) of s.90AF refer only to parties to a marriage and in this case the parties were not married.
Elsewhere in the Act, provisions are clearly made for similar powers to be given to the Court in cases involving de facto relationships as those given in relation to marriages. In the absence of such provisions here, I do not infer that s.90AF also covers injunctions made in relation to parties to a de facto relationship.
In other words, in my view there is no specific power in the Act for the Court to make an order or injunction under s.114 binding a third party in de facto relationship proceedings other than that found in s.114(3).
Therefore if I am to make an injunction binding Mr Watson as a third party, I can do so only under s.114(3) as set out previously.
My discretion to make such an order or injunction as would prevent Mr Watson from exercising his rights as mortgagee over the Applicant’s property is limited to “a case in which it appears to the court to be just or convenient to do so”.
There is absolutely no evidence that Mr Watson entered into the mortgage arrangement with the Applicant for any purpose other than to assist the Applicant as a favour to his friend, the Respondent.
To issue an injunction against him pursuing his rights under that mortgage arrangement would be greatly to his detriment, and I repeat that it is not necessary for me to issue that injunction in order to finally determine the dispute between the parties.
I can see no justice or convenience to the court in making orders which prevent him from pursuing his legal rights under that mortgage arrangement and I therefore decline to make such an injunction under s.114(3).
The submission of Mr Byrne was that the Respondent had essentially told the Applicant that he would look after her in the aftermath of the relationship, and that therefore it would be “regrettable” (to use Mr Byrne’s term) for him not to indemnify her against any losses incurred as a result of Mr Watson exercising his legal rights under the mortgage.
The Applicant’s evidence in relation to that matter is found in her affidavit material, but it is rejected in the affidavit of the Respondent filed on 1 September 2017.
It is the Respondent’s evidence that while he did say that he wished to help the Applicant after their relationship broke down, he was clear that he would pay her an amount up to $200,000 towards the purchase of a property for her and her daughter.
These are interim proceedings and I cannot make findings of fact as to who I believe in relation to that.
Even if I could, a statement made at the end of a relationship indicating an intent by one party to support the other does not give rise to any legal responsibility of that party to indemnify the former partner against any financial losses incurred after the relationship, and which arise from the former partner’s default in relation to mortgage responsibilities.
I therefore also decline to make an order requiring the Respondent to so indemnify the Applicant.
I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of Judge Small
Date: 14 September 2017
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