Filipovic & Filipovic (No 2)
[2023] FedCFamC2F 825
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Filipovic & Filipovic (No 2) [2023] FedCFamC2F 825
File number(s): MLC 13771 of 2021 Judgment of: JUDGE O'SHANNESSY Date of judgment: 7 July 2023 Catchwords: FAMILY LAW – property & section 106B proceedings – joinder application – whether an undertaking to be bound by result means joinder is not necessary – overarching agreement or partnership alleged over companies and trusts – whether possible at law- whether assets of trusts “property” of a party to the marriage – arguable case found – joinder necessary – proposed parties joined. Legislation: Family Law Act 1975 (Cth), ss 79, 106B
Federal Circuit and Family Court Act 2021 (Cth), s 26
Federal Circuit and Family Court of Australia (Family Law) Rules 2021, rr 3.01, 3.03, 7.06, 10.18(5)
Partnership Act 1895 (WA)
Partnership Act 1958 (Vic)
Cases cited: B Pty Ltd v Ors & K and Anor [2008] FamCAFC 113; [2008] FLC 93-380; (2008) 39 Fam LR 488
Beecham Group Ltd v Bristol Laborities Pty Ltd [1968] HCA 1
Chen & Chen & Or Anor [2017] FamCA 285
Commissioner of State Revenue v Rojoda Pty Ltd (2020) 268 CLR 281; [2020] HCA 7.
Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129
Ganem & Ganem [2014] FamCA 1177
Genasalio & Genasalio [2023] FedCFamC1F 160
Hancock Family Memorial Foundation Limited v Fieldhouse (No 3) [2005] WASCA 93
Harris & Dewell and Anor (2018) FLC 93-839
Ingles & Ingles & Ors [2019] FamCA 33
Love & Thwaites (No 4) [2014] VSCA 56
Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366; (2008) FLC 93-388; (2008) 40 Fam LR 1
Lindon v Commonwealth (No 2) [1996] HCA 14; (1996) 136 ALR 251; (1996) 70 ALJR 541
Mir v Mir [2023] NSWSC 408
Nickson & Kessell [2020] FamCA 931
Palermo v Palermo [2015] WASA 49
Pleash (Liquidator) v Tucker [2018] FCAFC 144
Re Webster (1975) 132 CLR 270
Rigby & Kingston [2020] FamCA 8
Southern & Southern [2017] FamCA 128
Tsiang & Wu [2019] FamCAFC 128
Wayne & Dillon [2008] FamCAFC 204; (2008) 40 Fam LR 543
Woodcock & Woodcock No 2 [2022] FedCFamC1F 173
Division: Division 2 Family Law Number of paragraphs: 128 Date of hearing: 12 December 2022 & 21 March 2023 Date of last submissions: 16 June 2023 Place: Melbourne Counsel for the Applicant: Mr A.M. Dinelli SC Counsel for the Applicant: Ms H. Dellidis Solicitor for the Applicant: Mills Oakley Lawyers Counsel for the First Respondent: Mr J. Mellas Solicitor for the First Respondent: Kenna Teasdale Lawyers Counsel for the Second, Third and Fourth Respondents: Mr L. Glick KC Solicitor for the Second, Third and Fourth Respondents: Russell Kennedy Lawyers ORDERS
MLC 13771 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS FILIPOVIC
Applicant
AND: MR FILIPOVIC
First Respondent
MR B FILIPOVIC
Second Respondent
C PTY LTD
Third Respondent
D PTY LTD
Fourth Respondent
order made by:
JUDGE O'SHANNESSY
DATE OF ORDER:
7 July 2023
THE COURT ORDERS THAT:
Upon the undertaking of the Applicant Wife, Ms Filipovic as to damages by her senior counsel, to submit to such order (if any) as the court may consider to be just for the payment of compensation (to be assessed by the court or as the court may direct) to any person (whether or not that person is a party) affected by the operation of order 2 herein or any continuation (with or without variation) of order 2 and to pay that compensation to the person/s affected by order 2 herein:
1.The following be and are parties to these proceedings:
(a)Mr B Filipovic as the Second Respondent; and
(b)C Pty Ltd as trustee for C Investment Trust as the Third Respondent; and
(c)D Pty Ltd as trustee for the B Filipovic Investment Trust as the Fourth Respondent.
2.Save in the ordinary course of business, the Second Respondent, Mr B Filipovic and the Third Respondent, C Pty Ltd and the Fourth Respondent D Pty Ltd, be and are restrained by themselves, their servants or agents from:
(a)Dealing with, transferring, encumbering or dissipating the assets of C Pty Ltd and D Pty Ltd;
(b)Altering the directorship and/or shareholding of C Pty Ltd and/or D Pty Ltd; and
(c)Liquidating or deregistering C Pty Ltd and/or D Pty Ltd,
without first obtaining the Applicant Wife’s written consent or obtaining an Order of the Court.
3.Within 21 days of these Orders, the Second and Third Respondents provide to the Applicant the following documents:
(a)For C Pty Ltd:
(i)A copy of the Company Constitution;
(ii)Company Taxation Returns for the financial years ended 30 June 2019, 30 June 2020 and 30 June 2021;
(iii)Financial Statements for the financial years ended 30 June 2019, 30 June 2020 and 30 June 2021;
(iv)Business Activity Statements for the period January 2021 to the present date;
(v)Bank Statements and / or loan accounts in relation to C Pty Ltd for the period 1 January 2021 to the present date; and
(vi)A copy of the Contract of Sale, Settlement Statement and particulars as to the application of funds from the sale of E Street, Suburb F.
4.Within 21 days of these Orders, the Second and Fourth Respondents provide to the Applicant the following documents:
(a)For D Pty Ltd:
(i)A copy of the Company Constitution;
(ii)Company Taxation Returns for the financial years ended 30 June 2019, 30 June 2020 and 30 June 2021;
(iii)Financial Statements for the financial years ended 30 June 2019, 30 June 2020 and 30 June 2021;
(iv)Business Activity Statements for the period January 2021 to the present date; and
(v)Bank Statements and / or loan accounts in relation to D Pty Ltd for the period 1 January 2021 to the present date.
(b)For G Pty Ltd:
(i)A copy of the Company Constitution;
(ii)Company Taxation Returns for the financial years ended 30 June 2019, 30 June 2020 and 30 June 2021;
(iii)Financial Statements for the financial years ended 30 June 2019, 30 June 2020 and 30 June 2021;
(iv)Business Activity Statements for the period January 2021 to the present date; and
(v)Bank Statements and / or loan accounts in relation to G Pty Ltd for the period 1 January 2021 to the present date.
(c)For H Pty Ltd:
(i)A copy of the Company Constitution;
(ii)Company Taxation Returns for the financial years ended 30 June 2019 to 30 June 2021;
(iii)Financial Statements for the financial years ended 30 June 2019, 30 June 2020 and 30 June 2021;
(iv)Business Activity Statements for the period January 2021 to the present date;
(v)Bank Statements and / or loan accounts in relation to H Pty Ltd for the period 1 January 2021 to the present date.
(d)For J Pty Ltd:
(i)A copy of the Company Constitution;
(ii)Company Taxation Returns for the financial years ended 30 June 2019, 30 June 2020 and 30 June 2021;
(iii)Financial Statements for the financial years ended 30 June 2019, 30 June 2020 and 30 June 2021;
(iv)Business Activity Statements for the period January 2021 to the present date; and
(v)Bank Statements and / or loan accounts in relation to J Pty Ltd for the period 1 January 2021 to the present date.
(e)All documents in respect to the acquisition of the property at K Street, Town L including, but not limited to, documents relevant to the source of funds applied to purchase this property.
5.Within 28 days of these Orders, the parties jointly appoint a property valuer to undertake a Single Expert Valuation in accordance with the Rules (and in default of agreement within 14 days of these Orders, the Applicant Wife nominate three and the First Respondent together with the other Respondents choose one) of the properties located at:
(a)M Street, Suburb N;
(b)O Street, Suburb F;
(c)K Street, Town L;
(d)P Street, Suburb F;
(e)Q Street, Suburb F;
(f)R Street, Suburb F;
(g)S Street, Suburb F; and
(h)T Street, Suburb U,
with the costs of the Single Expert Valuer as to the properties described at (a) & (b) to be shared equally between the Applicant Wife and the First Respondent Husband and with the costs of the Single Expert Valuer as to the properties at (c)-(h) to be shared between the Applicant Wife as to one third part, the First Respondent Husband as to one third part and the Second, Third and Fourth Respondent’s as to one third part.
6.Any application for costs be in accordance with the Rules.
7.The Wife’s application in a proceeding filed 28 July 2022 and the responses to that application filed 25 August 2022 and 8 September 2022 are otherwise dismissed.
8.These proceedings be listed for directions hearing before Registrar V on 16 August 2023 at 2:00pm.
AND THE COURT NOTES THAT:
A.If in any proceedings there are allegations of family violence and the provisions of section 102NA of the Family Law Act 1975 apply (see attached Family Violence Information Sheet), any unrepresented party will not be permitted to personally cross-examine the other party/parties.
B.Affected unrepresented parties may apply to the court and then to the Commonwealth Family Violence and Cross-Examination of Parties Scheme (“the Scheme”) for representation but any such application must be made at least 12 weeks prior to the final hearing.
C.Further information about the legislation and the Scheme can be found at Part 4 of the attached Family Violence Information Sheet.
D.If s102NA applies and a party becomes unrepresented after trial directions have been made, that party is required to promptly advise the Court.
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 a pseudonym Filipovic & Filipovic (No 2) has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE O’SHANNESSY
INTRODUCTION
The question I must determine is whether or not to order the joinder of third parties to the section 79 proceedings between the Husband and Wife as the Wife seeks and the Husband and the parties proposed to be joined all oppose. I must also determine some ancillary disputes with respect to financial disclosure and restraints.
The Applicant Wife, Ms Filipovic (‘the Wife’) and the First Respondent Husband, Mr Filipovic (‘the Husband’), commenced cohabitation in 2013. They married in 2015 and separated on a final basis on 12 October 2021 and agitate competing applications for property division orders pursuant to section 79 of the Family Law Act 1975 (Cth) (‘the Act’).
The Wife seeks to join as parties to the proceedings the Husband’s brother, Mr B Filipovic (‘the Brother’), C Pty Ltd and D Pty Ltd. In these reasons they are collectively referred to as the Proposed to be Joined Parties (‘the PJPs’).
Applicable Rules and legal principles on joinder
All parties acknowledge rule 3.01 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (‘the Rules’). The Wife seeks that I join the PJP’s to the proceedings but she does so after the first court date has passed and so needs the leave of the court. Rules 3.01 and 3.03(4) provide:
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.
…
3.03 Adding and Removing a Party
…
(4)A party may only add another party after the first court date with the leave of the court.
…
[Notes omitted, emphasis added]
Hence the applications turn on whether the PJPs’ participation as a party in the proceedings between the Husband and Wife is necessary for the court to determine all issues in dispute and the Wife, as Applicant, has the burden of satisfying me that is so.
It was submitted by senior counsel for the PJPs that the two parts of rule 3.01 must be read conjunctively: that the first “directly affected” and the second “participation…is necessary” parts of the rule must both be satisfied for joinder of a party. I accept that submission.
There are substantial factual and legal disputes between the Wife, the Husband and the PJPs. But there was no dispute that rule 3.01 was applicable and that the underlying factual matrix necessary to impose on a person not a party to the marriage, the burdens, risks, costs and duties of being a party to a section 79 dispute are set out in the relevant authorities.[1]
[1] Precedent cases where the stated principles of law are binding on me or highly persuasive.
Senior counsel for the PJPs helpfully referred to the authorities (their applicability was not disputed) to illustrate relevant principals. They included:
·Any person pressed to be joined to a proceeding ought, at the point of application, be able to take advice on whether the facts pleaded (if established) would lead to a successful claim and if the pleaded facts would not establish a successful claim the person should not be joined.[2]
·The fact that disclosure may be more efficiently obtained does not of itself provide an appropriate basis for joinder as a party to the proceedings.[3]
·Third parties should not be joined on the basis that at trial facts to support the application may be asserted and proved. Sufficient facts must be asserted at the time of the joinder application to demonstrate that, if proved, the law arguably provides the relief sought.[4]
[2] Wayne & Dillon [2008] FamCAFC 204; (2008) 40 Fam LR 543, Warnick J at [17].
[3] Southern & Southern [2017] FamCA 128, Hogan J at [9].
[4] Rigby & Kingston [2020] FamCA 8, where at [16] Carew J adopted the 2008 statement of the law as to joinder of the Full Court in B Pty Ltd v Ors & K and Anor [2008] FamCAFC 113; [2008] FLC 93-380; (2008) 39 Fam LR 488 at [52].
Senior Counsel for the PJPs also helpfully referred me to Hancock Family Memorial Foundation Limited v Fieldhouse (No 3) [2005] WASCA 93 (‘Hancock & Fieldhouse No.3’):
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…
[Emphasis added and citations omitted]
I accept the common sense, guidance and authority of those principals as to necessary conditions to the application of rule 3.01. Hence, the rule 3.01 tests embrace concepts applicable to a summary dismissal application. It was not in issue on this application that where there are contested factual allegations on an application for joinder, on an interlocutory application on the papers, I must take the Applicant’s (the Wife’s) evidence at its highest unless the evidence is inherently incredible or contradictory and/or, I would add, inconsistent with incontrovertible facts.
Because this is an interim or interlocutory hearing on the papers, I will not attempt to determine disputed facts or give an assessment or prediction of likelihood of what disputed facts may or may not be proved at final hearing.
BACKGROUND
The Husband and the Wife cohabited as man and wife over eight years and have made, I assume, different contributions recognised by section 79(4) of the Act over about 10 years as at the time of this joinder application. They have two children aged five and four and the parties also seek that the court determine assistance as to their children’s living arrangements. The Wife is aged 42 and works part time, and the Husband is aged 40 and, he says, works as a company director. The Husband and his brother have had a business association since 2006, before the cohabitation of the Husband and Wife.
The companies and trusts
It was common ground before me that up to shortly before separation, the Husband and the Brother were recorded as having the following positions and entitlements in companies and trusts.
The 2007 Trust
The Husband and the Brother were the only directors of, and equal shareholders of 100% of the shares in, D Pty Ltd [5]. D Pty Ltd was the trustee of the B Filipovic Investment Trust. The B Filipovic Investment Trust deed or settlement was in evidence exhibited to the Brother’s affidavit. That deed, although turning on its own terms, contains such ubiquitous terms that it can be fairly described as a discretionary trust, settled or established in 2007 (that is some years before the marriage), and containing provisions for an ‘Appointor’[6] (of the Trustee) and ‘corpus beneficiaries’ and provisions of a ‘discretionary class’ of beneficiary being the extended families of the specified or corpus beneficiaries.
[5] A company referred to in the Husband’s affidavit at [15], [17] and [20] and by inference at [11].
[6] The offices or positions of appointors are described in the trust deeds as ‘Appointor.’
The corpus beneficiaries of the B Filipovic Investment Trust were the Husband, the Brother and their parents, Mr W and Ms X. The appointors of the B Filipovic Investment Trust were the Husband and the Brother. The deed provided that for some events the agreement of the trustee/s and the appointor/s was required.
The 2015 Trust
The provisions of the 2015 Trust are identical to the 2007 Trust save for the date of settlement and the Husband and the Brother’s parents not being corpus beneficiaries. The Husband and the Brother were the only directors of, and equal shareholders of 100% of the shares in C Pty Ltd[7]. C Pty Ltd was the trustee of the C Investment Trust. The C Investment Trust deed or settlement was in evidence exhibited to the Brother’s affidavit. Like the 2007 Trust, the deed of the C Investment Trust, although turning on its own terms, contains such ubiquitous terms that it can be fairly described as a discretionary trust, settled or established in March 2015 (that is during the marriage), and containing provisions for an ‘Appointor’ of the Trustee and of ‘corpus beneficiaries’ and provisions of a ‘discretionary class’ of beneficiary being the extended families of the specified or corpus beneficiaries.
[7] Also a company referred to in the Husband’s affidavit at [15], [17] and [20] and by inference at [11].
The corpus beneficiaries of the B Filipovic Investment Trust were the Husband and the Brother (and not their parents). The appointors of the B Filipovic Investment Trust were the Husband and the Brother. The 2015 deed also provided that for some events the agreement of the trustee/s and the appointor/s was required.
It was not disputed that D Pty Ltd and C Pty Ltd held, or had held, real property or interests in other companies that hold or had held real property.
Common Provisions of the two Trusts
The vesting dates of each trust was the date specified in the schedule (80 years from the date of settlement) “or an earlier date which the trustees may appoint in writing” and provided the trustees with very wide powers of investment and includes:
DISTRIBUTION
15.
(a)The Trustees shall hold the Trust Fund or such parts of the Trust Fund as have not been appropriated or distributed and which have not vested absolutely; and
DISCRETIONS
(i)shall pay or apply or appropriate the whole or such part of the income of the Trust Fund and in such manner and at such times as the Trustees shall in their absolute discretion think fit to or for the benefit of the discretionary class…[8]
…
EXCLUSION FROM BENEFIT
19.If the Appointor consents in writing the Trustees may exclude any beneficiary from any further benefit hereunder and if such excluded beneficiary consents to the action of the Trustees in declaring that he or she would thereafter be excluded from further benefit then the action of the Trustees shall become irrevocable…
[8] Which includes the Husband and the Brother and their spouses and families.
…
AMENDMENT
23.The Trustees for the time being may with the consent in writing of the Appointor (if any) from time to time revoke add to or vary any of the terms or conditions of this deed Provided [sic] that any such amendment shall not infringe the rule against perpetuities, or affect the beneficial entitlement to any amount set aside allotted to or used for the benefit of any beneficiary prior to the date of any such variation alteration or addition.
These trusts held valuable property and until shortly before separation the Husband and the Brother were the ‘Appointors’ and were the only members of, and controlled, the ‘Trustees.’
THE PROCEEDINGS
Not quite two months after separation, on 10 December 2021, the Wife filed an application in this Court for parenting orders only. The Husband filed a response as to parenting orders only and a responding affidavit on about a month later. Both parents sought competing applications for residency of the parties’ two children.
About a month after the Husband filed his parenting orders only response, on 7 February 2022, the Wife filed an Amended Initiating Application seeking, among some additional parenting orders, orders as to property division invoking section 79 of the Act. She also sought particular financial disclosure from the Husband.
Husband reveals share transfers
About two months after that, on 7 April 2022 the Husband filed an amended response and a financial statement.
At item #41 of his financial statement he deposed to an interest in a business with the description of as “Y Pty Ltd/Z Pty Ltd/ AA Pty Ltd, and the Filipovic (partnership)”. Significantly for this application and the trial issue of section 106B of the Act, at item #59[9] of his filed financial statement the Husband deposed to two disposals of property about six weeks before separation:
·His shareholding in [D Pty Ltd] … (value/amount received TBA);
·His shareholding in [C Pty Ltd] … (value/amount received TBA).
[9] Item #59 of the standard or court approved financial statement asks the deponent to, “Specify property falling within Rule 6.06(3)(g) disposed of by you in the 12 months before separation and since your separation” and the form of the financial statement filed by the husband on 7 April 2023 simply states ‘…since your separation,” but nothing turns on this.
The Husband’s evidence
On 11 May 2022 the Husband filed an affidavit offering an explanation for the disposal of those shareholdings. This was to the effect that whether or not recorded in company records (and the detail of that affidavit was repeated in the Husband’s affidavit filed 25 August 2022 (‘the Husband’s affidavit’)), he said the situation was that:
·Since 2006, the Husband and the Brother had conducted the “business” Y Pty Ltd and “[the Brother] and I considered Y Pty Ltd to be a joint business for both our benefit and we operated and worked in it together.”[10];
·As a result of the failed investments Y Pty Ltd had made “it was understood that [the Brother] and [the Husband] that I would reimburse him such funds and drawings that were lost through such investments. We did not document this agreement in a formal written document as this was not how we had conducted our business affairs at any stage”;[11]
·It was agreed at all times that the Brother had a beneficial interest in the business and that it was run jointly and to benefit both brothers;[12]
·That D Pty Ltd and C Pty Ltd were established and operated by the Brother and the Husband during the course of their business relationship;[13]
·That the parents of the Husband and the Brother had lent the Husband a substantial sum to invest in D Pty Ltd back in 2008 and another substantial sum in 2017 to invest in C Pty Ltd;[14] and
·In January 2021 the Husband was concerned he could not repay his borrowings from his parents or compensate the Brother for the money lost in the failed investments (who had to live with his parents due to the lost investments) and that his parents sought repayment of the borrowed funds.[15]
[10] See [6] & [8] of the Husband’s affidavit.
[11] See [14] of the Husband’s affidavit.
[12] See [11] of the Husband’s affidavit.
[13] See [15] of the Husband’s affidavit.
[14] See [16] & [18] of the Husband’s affidavit.
[15] See [29] of the Husband’s affidavit.
As a consequence of all this the Husband said he agreed to, and then did, transfer all his interest in D Pty Ltd and C Pty Ltd to the Brother and the Brother transferred all his interest in B Filipovic to the Husband. He did not inform the Wife, although he said she knew of his difficult financial circumstances. The Wife alleges these transfers happened at a time of significant matrimonial disharmony shortly before separation and were intended to defeat her anticipated property settlement.
Husband retires as appointor and removed as a beneficiary
The documents annexed to the Brother’s affidavit record that six months before the share transfers, back in February 2021 (about eight months before separation), the Husband and the Brother held meetings of the trustees of the B Filipovic Investment Trust and the C Pty Ltd Investments Trust and resolved to exclude the Husband as a beneficiary of those Trusts and record that he retired as an appointor of each trust. The Wife alleges these transfers happened at a time of significant matrimonial disharmony shortly before separation.
On the day of the next directions hearing, 28 July 2022, the Wife filed an application in a proceeding seeking an order to join the PJPs to the proceedings and orders for restraints on disposal of property, financial disclosure and valuations. It is those applications I now deal with.
The Wife says that at final hearing she seeks to set aside the share transfers in the trustee companies and the resignations as appointor and renouncement of entitlement as a beneficiary in the trusts pursuant to section 106B of the Act. The transactions and instruments of February 2021 and August 2021 that the Wife seeks to set aside are referred to in these reasons as the ‘impugned transactions’.
Section 106B of the Act is as follows:
106B Transactions to defeat claims
(1)In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
…
(2)The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
(3)A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchaser or other person interested of and incidental to any such instrument or disposition and the setting aside or restraining of the instrument or disposition.
Property of Trusts alleged to be valuable
The Wife estimated that the total value of real estate owned by the Husband and the PJPs totals approximately $13 million, less liabilities of unknown value. The Husband asserts that the Wife does not have the expertise for her estimates of value to be either admissible, or of any weight, if admissible. I regard these estimates as evidence only of the Wife’s belief as to value and that goes only to the point that the Wife asserts the dispute is about valuable property. The Husband and the Brother did not descend to assert any value of the property of the controversial trusts, but it was not asserted that they did not hold valuable property.
The matter came before me for interim defended hearing on 12 December 2022. I heard the commencement of the Wife’s submissions (as Applicant) and, after complaint that the PJPs were taken by surprise and it being evident the matter would not conclude that day, following counsel conferring, by consent the part-heard application was adjourned to 21 March 2023. Consent orders were made for the Wife to file and serve a statement of contentions to fact and law and for the Husband and the PJPs to file a reply if they so chose. The Wife was permitted to provide a further reply if they so chose. Without prejudice to his position, the Brother provided an undertaking to the Court through his Senior Counsel that other than in the ordinary course of business he would not deal with or dissipate the assets of the entities or alter the structure of them without first giving the Wife 14 days’ written notice, or by order of the court.
The matter returned before me on 21 March 2023 and submissions concluded.
On 25 May 2023 solicitors for the PJPs, and on 26 May 2023 the Wife’s solicitors, referred me (and each other) to authorities decided since the last oral submissions on 23 March 2023. I advised that further short written submissions about those authorities would be taken if filed by 16 June 2023. Further submissions were received from the Wife and from the PJPs on 16 June 2023 and have been considered.
DOCUMENTS RELIED UPON
The Wife relied upon the following documents:
·The Wife’s Affidavit filed 10 December 2021 (paragraphs 29 – 31);
·The Wife’s Affidavit filed 28 July 2022;
·Amended Initiating Application filed 28 July 2022;
·The Wife’s Affidavit filed 21 September 2022;
·Statement of contentions as to facts and law filed 2 March 2023;
·The Wife’s tender bundle; and
·The Wife’s further written submissions as to new authorities filed on 16 June 2023.
The Husband relied upon the following documents:
·Response to Application in a Proceeding filed 25 August 2022 (where he sought specific orders for disclosure from the Wife and the dismissal of her joinder application);
·The Husband’s Affidavit filed 25 August 2022;
·Response to statement of contentions as to facts and law filed 17 March 2023; and
·The Husband’s Affidavit filed 20 March 2023.
The Brother relied upon the following documents:
·Response to Application in a Proceeding filed 8 September 2022;
·The Brother’s Affidavit filed 8 September 2022;
·The Brother’s Affidavit filed 17 March 2023;
·Response of PJPs to statement of contentions as to facts and law of the Wife filed 20 March 2023; and
·The Brother’s further written submissions as to new authorities filed on 16 June 2023.
THE WIFE’S CASE
In summary, the Wife ultimately pressed for the following orders:
·That pursuant to Rule 3.03(4) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), the PJPs be joined to the proceedings;
·Restraint on the PJPs, their servants or agents from dealing with, transferring, encumbering or dissipating the assets of, altering the directorship and/or shareholding of, and liquidating or deregistering, the entities of the PJPs.
·Substantive financial disclosure from the Brother with respect to the PJP companies and other companies in which the PJP companies held shares or interests and documents associated with the Town L property; and
·Single expert valuations for eight separate properties with the cost to be shared equally by the parties.
All parties’ applications and responses sought costs against the other side/s and, I infer, for the purpose of alerting the other side/s to potential applications. Sensibly, costs were not addressed before me and any application for costs will be in accordance with the Rules after these orders are made.
Sensibly and properly, at this interim hearing, the Wife did not press her application pursuant to section 106B of the Act to set aside the impugned share transfers, resignations and renunciations, recognising that was an issue that should be dealt with at final hearing.
The substance of the Wife’s case is set out in her statement of contentions as to facts and the law, which reads:
6.The Wife contends that the assets of the Trusts are, in reality, property of the Husband and the Brother, within the meaning of s 4, and for the purposes of s 79, of the Act.
7.The Husband and the Brother have operated, relevantly, the Trusts, the [Town L] Property … and the other companies and entities … akin to a partnership in which each has an equal fixed interest in the assets of thereof …
8. Further or alternatively, the Wife contends that the instruments:
(a)executed on 2 February 2021, that effected the retirement of the Husband as appointer and consent to being excluded as beneficiary of the Trusts; and
(b)on 25 August 2021, that effected the resignation of the Husband as co-director and transfer to the Brother his shares in the Corporate Trustees,
(collectively, “the Dispositions”[16])
[16] In these reasons referred to as the “impugned transaction”.
are a sham and/or entered into to defeat an anticipated order in this proceeding …
…
12.Further or alternatively, the Wife further contends the Brother holds his legal interest in the property at [the [Town L] property] beneficially for the Husband, pursuant to a constructive or resulting trust …
…
15.The Trust Deed of the [B Filipovic] Investment Trust was dated 2007 and, until the Dispositions, had the effect that:
(a)the Husband [and] the Brother were joint appointers and have to act jointly;
(b)the Husband and the Brother were co-directors and equal shareholders of [the Trustee];
…
(d)the Husband [and] the Brother, together with each of their parents were named as corpus beneficiaries;
(e)the Husband and the Brother, and their spouses, and former spouses, were included as related beneficiaries in the discretionary class of beneficiaries;
…
(g)the capital and income of the Trust was to vest in equal shares in the corpus beneficiaries.
16.The [B Filipovic] Investment Trust currently owns [valuable real property]…
…
18.The Trust Deed of the [C Pty Ltd] Trust …until the Dispositions, had the effect that:
(a)the Husband [and] the Brother were joint appointers and have to act jointly;
(b)the Husband and the Brother were co-directors and equal shareholders of [the Trustee];
…
(d)the Husband [and] the Brother … were named as corpus beneficiaries;
(e)the Husband and the Brother, and their spouses, and former spouses, were included as related beneficiaries in the discretionary class of beneficiaries;
…
(g)the capital and income of the Trust was to vest in equal shares in the corpus beneficiaries.
19.The [C Pty Ltd] Trust currently owns, at least, half of the shares in [other companies that own or have owned valuable real property]…
…
20.Since about 2006, the Wife contends the Husband and the Brother have agreed to conduct businesses and make investments by way of a partnership … pursuant to which they have operate and own (as the case may be):
(a) the [business] trading as “[Y Pty Ltd]”;
(b) the partnership known as “[the Filipovic partnership]”;
(c) the company known as “[Y Pty Ltd]”;
(d) the company known as “[Y Pty Ltd]”; and
(e)the Trusts, namely the “[B Filipovic] Investment Trust” and [C Pty Ltd] Trust”,
(the “[C Pty Ltd] Partnership”).
21.The Wife contends the Husband and the Brother, through [their] Partnership and otherwise, have operated their entities jointly, in partnership, with equality, for their mutual benefit and, in the absence of disclosure to the contrary, that this extends to the assets of the Trusts.
Particulars
(a)-(i)[various transfers of money between 31 May 2021 and 27 Feb 2022 alleged to be to the Husband’s benefit and demonstrate a partnership]
(j)[D Pty Ltd] remains the landlord of [B Filipovic], the business conducted by the Husband and the Brother.
(k)In or around 2017 the Husband and the Brother invested [B Filipovic’s] profits in [another company] formed to develop an application for tablets and mobile devices, of whom the Husband and Brother were, and remain, joint shareholders.
Further, the Wife refers to the evidence of the Husband himself at paragraphs 6, 8-10, 15 and 17.
…
24.In all of these circumstances, the Wife contends that the Husband and the Brother each have in reality, a fixed half interest in the assets of the Trusts, the [Town L] Property and other assets of the [Filipovic] partnership.[17]
[17] Emphasis added. That this state of affairs could exist was said by senior counsel for the PJPs, “to have been repudiated by the High Court”, in Commissioner of State Revenue v Rojoda Pty Ltd (2020) 268 CLR 281; [2020] HCA 7 (18 March 2020) (‘Rojoda’) at [33].
25.Alternatively,[18] the Wife contends the Husband’s right to due administration and due consideration is property.
26Further, the assets of the Trusts, the [Town L] Property and the other assets of the [Husband and the Brother’s] Partnership are capable of being valued in circumstances where the Husband and the Brother have benefited equally from them.
…
36.Further or alternatively, to the extent that the [Town L] Property does not form part of the [Filipovic] Partnership, the Wife contends that the Husband has a beneficial interest in the [Town L] Property.
37.Despite its registration in the name of the Brother, the [Town L] Property was purchased equally by the Husband and the Brother in 2009, such registration being effected as to qualify for the First Home Owners’ Grant and avoid land tax and other costs.
…
40.In these circumstances, the Wife contends the Husband has an interest in the [Town L] Property pursuant to a constructive or resulting trust.
…
43.The participation of the [PJPs] is necessary to remedy the Husband’s attempt to defeat the Wife’s entitlement to a just and equitable property settlement and properly determine and quantify his legal and equitable interest in the assets of the Trusts, pursuant to the [Filipovic] Partnership, or otherwise, the [Town L] Property and other assets of the [Filipovic] Partnership.
[Emphasis added]
[18]Discussed later in these reasons.
In oral submissions further paragraphs of the Husband’s affidavit were referred to and relied upon by the Wife to support her ‘partnership’ submission.[19]
[19] Being paragraphs 8, 9, 11, 14, 15, 19, 20 and 21, at TP 71 line 19.
It was not disputed that no financial statements or records or loan accounts of either of the trustee companies and/or trusts have been provided to the Wife.
Initially the Wife’s case was that the Husband and the Brother have treated the trust assets “akin to or reflective of entitlement in a unit trust as to 50 percent each.” Further, she said, the Brother has held the Town L property on trust for himself and the Husband as part of the ‘partnership.’ After the matter was adjourned part heard to allow for the filing of contentions of fact and law the Wife changed her case from “akin to … a unit trust… (with) 50% each” to the assertion that brothers had an agreement, a partnership, to conduct their business by the companies and trusts so that and to the effect that each was to have a fixed 50% interest or share in the assets of the partnership that included the property of the partnership, the trustee companies and the trusts. At both points the Wife maintained that the impugned transactions were shams and for the purpose of defeating her section 79 claim.
The Wife says that the Husband’s own evidence confirms the partnership of the brothers at the beginning of, and throughout their business ventures, in their partnership and via the companies and trusts.
The Wife disputes the two alleged loans from the Husband’s parents to him of $280,000 (in 2008) and of $290,000 (in 2017). Her case is that the Husband’s parents are of modest means, live in the only home they have ever owned, the Husband’s father was a tradesman and his mother has never worked outside the home, and therefore the Husband’s parents did not have substantive funds to lend to the Husband as alleged. She says, in any event, no evidence was put forward by way of a loan agreement or affidavit material by the Husband’s parents to support such a contention.
The ‘partnership’ aspect of the Wife’s case was summarised by her senior counsel as follows:
MR DINELLI: …So coming to the partnership as we describe it at paragraph 20 and following, we say that, since about 2006, … the husband and the brother have agreed to conduct businesses and make investments by way of a partnership pursuant to which they have operated and owned various entities, partnerships and indeed trustee companies pursuant to – we describe or define it as the [C Pty Ltd] partnership. It might be described as an overarching partnership. It’s overarching, your Honour, because the actual particular corporate or trust structures that they use underneath that partnership are all operated pursuant to the terms of the partnership.
In response to the assertion of the PJPs that as a matter of law there could not be, and cannot be, such a partnership or agreement, the Wife relied upon the unanimous Western Australian Court of Appeal decision of Palermo v Palermo [2015] WASA 49 (‘Palermo’). In that case Newnes J, with whom Buss and Mazza JJ agreed, observed:
2.… This appeal arises out of business activities in which the appellant and the respondent, who are brothers, were involved over a period of some 35 years. Those business activities involved property development, share dealing, corporate consulting, farming and an accounting practice. They led to the creation of a complex and extensive network of companies and trusts, commonly referred to in the litigation as the 'Palermo group' or the 'group entities'. After the appellant and the respondent fell out in 2011, a dispute arose as to the basis upon which the various businesses had been undertaken.
…
5.The appellant says that his Honour was in error in finding that the alleged inferred agreement was inconsistent with the corporate and trust structure and that in dismissing the appellant's claim his Honour failed to have regard to substantial evidence which supported the existence of that agreement.
…
28.The respondent denied there was any such partnership or relationship, and said that their past dealings did not reflect any agreement of the nature alleged by the appellant. Accordingly, their respective rights and entitlements in relation to the companies in the Palermo group and the exercise of their rights as shareholders were not confined by any obligations of the nature alleged.
…
150.It was conceded by senior counsel for the respondent that the primary judge would have been in error if he had found that an overall contractual agreement of the nature alleged by the appellant could not, as a matter of law, exist consistently with the corporate and trust structure the parties had established from 1976. That concession was properly made. …
…
156.In Friend v Brooker[20], Friend and Brooker …incorporated a company, of which they were appointed directors and of which their respective family trusts were equal shareholders....The company went into liquidation and was unable to repay money which Brooker had borrowed and lent to the company. Brooker alleged a partnership or joint venture existed between himself and Friend… the High Court…concluded that no right of contribution arose. The plurality noted the unchallenged finding of fact of the trial judge that from the time of incorporation of the company the partnership ceased, 'just as the parties intended'…
157.That case is a long way removed from the present case. It is not authority for the proposition that an inferred agreement of the nature alleged by the appellant could not, as a matter of law, exist consistently with the corporate and trust structure the parties had established.
…
159.It was, in my opinion, clearly open to the parties to agree, as the appellant alleged it was to be inferred that they had agreed, that, as between themselves, the shareholdings in the companies, the beneficial interests in the trusts, and the rights to capital and income (or the burden of losses) of the various entities, under their individual or collective control, were to be dealt with so that the total wealth generated by all of the businesses, to which either or both of them would otherwise be entitled, would be shared equally by the appellant and the respondent; what has conveniently been described by the appellant as an 'overarching agreement'.
[Citations omitted and emphasis added]
[20] Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129 and relied upon by the PJPs to support the argument that there could not, as a matter of law, be a partnership or overarching as alleged by the Wife.
The Wife’s alternate case: “due administration’ & “due consideration” argument
I refer to paragraph 25, the alternate contention, of the Wife’s statement of contentions as to facts and the law, recited earlier, that asserted that the Husband’s right to “due administration” and “due consideration” (as a beneficiary of the trusts) is property. Senior counsel for the Wife contended that even if the “partnership” or “overarching partnership” contentions were not accepted the “due administration” and “due consideration” aspects were property and the PJPs still needed to be joined.
This assertion rested, at least in part, of the observations of the High Court in Kennon v Spry.[21] In Kennon v Spry the husband was the sole trustee of a discretionary trust where the beneficiaries included the wife and the parties’ children. He said the substantial assets of the trust were not part of the property pool for division between himself and the wife. The learned primary judge, the Full Court of the Family Court and the High Court disagreed. Gummow and Hayne JJ observed:
137.… What matters in this case is that once the 1998 Instrument and the 2002 Instrument were set aside by the s 106B orders, the property of the parties to the marriage or either of them was to be identified as including the right of the wife to due administration of the Trust, accompanied by the fiduciary duty of the husband, as trustee, to consider whether and in what way the power should be exercised. And because, during the marriage, the husband could have appointed the whole of the Trust fund to the wife, the potential enjoyment of the whole of that fund was "property of the parties to the marriage or either of them". Furthermore, because the relevant power permitted appointment of the whole of the Trust fund to the wife absolutely, the value of that property was the value of the assets of the Trust. In deciding what orders should be made under ss 79 and 80 of the Act, the value of that property was properly taken into account. …
[21] [2008] HCA 56; (2008) 238 CLR 366; (2008) FLC 93-388; (2008) 40 Fam LR 1 (‘Kennon v Spry’).
French CJ observed:
78.Gummow and Hayne JJ, in their joint reasons, characterise Mrs Spry's right with respect to the due administration of the Trust as part of her property for the purposes of the Family Law Act. I respectfully agree with their Honours that prior to the 1998 Instrument the equitable right to due administration of the Trust fund could be taken into account as part of the property of Mrs Spry as a party to the marriage. So too could her equitable entitlement to due consideration in relation to the application of the income and capital. In so agreeing, however, I acknowledge, consistently with the observations of the Full Court in Hauff and Evans, that it is difficult to put a value on either of these rights though a valuation might not be beyond the actuarial arts in relation to the right to due consideration.
However, in this case, if the impugned transactions were set aside, the Husband would not be the sole trustee but only one of two directors and shareholders in the trustee companies, one of several beneficiaries and one of two appointors. So, would the right of the Husband as a corpus beneficiary and/or the Wife, as a discretionary beneficiary, to the due administration of the trusts and the right to due consideration by the trustees amount to ‘property’ of either of them for the purpose of the section 79 proceedings, as the Wife’s alternative cases asserts?
Senior counsel for the PJPs concisely described the position as:
MR GLICK:The proposition which is embedded in …Kennon v Spry, as to why the court was able to adjust the rights of the parties and say the assets were the husband’s assets was because, as said by Gummow, Hayne JJ and his Honour the Chief Justice, French CJ, the trustee was able to determine who got it, who got the income and who got the 40 capital. In this case that – and that’s what Harris v Dewell picks up – am I as the appointor, a single appointor, able to determine who gets what? And the answer is yes, because if this trustee doesn’t listen to me I will appoint myself.
…
As the law presently stands which… is binding on this court, the Court of Appeal has said given Kennon v Spry… does the husband have the ability to determine that there will or will not be a distribution and to whom? In Spry, yes…but in this case, no.
THE PROPOSED TO BE JOINED PARTIES’ (‘THE PJPS’) CASE
The PJPs relied on one affidavit with annexures, the annexures including details of the trustees for the relevant trusts and an ASIC return. The Brother sought an order dismissing the Wife’s Application insofar as to orders relating to the PJPS, and costs on an indemnity basis against the Wife.
The PJPs case, as put with some force and authority by senior counsel, was that joinder should be refused because:
·The Wife’s contentions of law and fact document, said to contain the facts that if made out at trial are necessary for her case to succeed, are not actually contentions of fact. Hence, her case against the PJPs must fail. The Wife’s pleading or contentions did not disclose such acts, facts, circumstances or things, that if made out at trial, would render any part of the property of the trusts, or the Town L property registered in the Brother’s sole name, property of the Husband.
·There is no point joining the PJPs because, there being no allegation of the trusts themselves being shams, even if the impugned transactions were set aside, no part, let alone 50% of the assets of the trustee companies and trusts, as a matter of law are could be property of the Husband for the purposes of the section 79 proceedings. This was said to be because there cannot, as a matter of law, be a partnership or an agreement akin to a partnership to conduct the trustee companies and trusts to effect the fixed 50/50 arrangement contended by the Wife. Instead, parties and the PJPs are bound by the trust structure and the terms of the trust deeds and the trustees’ duties according to settled law.
·The interest of the Husband in the trusts and/or the assets of the trusts could not be property for the purposes of the section 79 proceedings because, even if the impugned transactions were set aside, because the Husband, as merely one of two directors of the trustee companies, merely one of two 50% shareholders in the trustee companies, one of two (or four) corpus beneficiaries and only one of two appointors (who had to act jointly), did not have the necessary legal control, as was necessary on Kennon v Spry principles, for any part of the property of the trusts or his rights or interest in the trust to be his or the Wife’s property for the purpose of the section 79 proceedings. They relied upon the Full Court in Harris & Dewell and Anor (2018) FLC 93-839 (‘Harris & Dewell’) to demonstrate that the lack of unilateral legal control means there is not ‘property’.
·It was conceded that, if the impugned transactions were set aside which was opposed, that the Husband would have a financial resource by or in the trusts, but this did not and could not amount to “property”, and that meant it was not necessary for the PJPs to be parties to the proceedings between the Husband and the Wife.
·The PJPs would give an undertaking to be bound by the result of the section 106B application to set aside the impugned transactions and so rendering the joining of the PJPs entirely unnecessary for the purposes of rule 3.01.
·The Town L property is registered in the Brother’s sole name and hence, absent fraud, he has indefeasible title and on the pleaded facts neither a constructive or resulting trust could arise.
·The alleged overarching partnership was inconsistent with the trustees’ fiduciary obligation to consider all beneficiaries.
·Partners of a partnership[22] or a beneficiary of a trust[23] or a shareholder of a company[24] (all with different interests) do not have a fixed interest of the assets of the partnership or the trust or the company.
[22] See Rojoda at [33-34].
[23] See the Full Court of the Federal Court in Pleash (Liquidator) v Tucker [2018] FCAFC 144 recited at [160] of Ingles & Ingles & Ors [2019] FamCA 33, Berman J at [160].
[24] See the High Court in Re Webster (1975) 132 CLR 270 at [43].
The PJPs assert that on the conventional principals of Kennon v Spry and Harris & Dewell the Husband did not ever have the requisite unilateral legal control of the trusts for the trusts or the property of the trusts to ever be the property of the Husband. They also argued that during the period in which both brothers were directors of the corporate trustee and the joint appointors under the trusts deeds, had there have been a dispute with respect to decisions within the trustees the brothers would have been in a deadlock. In that “deadlock” case it was said no assets or income could be distributed and the assets and income would accumulate until the, many years hence, vesting day when the corpus beneficiaries, the Husband and the Brother and their parents in the case of the B Filipovic Investment Trust and the Husband and the Brother in the case of the C Pty Ltd Investment Trust, would receive the benefit of the trusts in the equal proportions.
The PJP’s assert Harris & Dewell completely rebuts of the Wife’s assertion that 50% of the trusts, or 50% of the property of the trusts, is matrimonial property.
In Harris & Dewell the husband had the day-to-day “run” of a unit trust where his aged father had legal control. In that case the husband’s father owned all of the units in the unit trust. The husband’s father owned 68% of the shares in the corporate trustee and the husband owned the balance, but the husband was not a director of the corporate trustee. It was not asserted that the trust was a sham. The ultimate control of the vesting of the trust property rested with the husband’s father. The Full Court approved the finding of the learned trial judge that the Husband’s interest in the relevant trust did not give him legal control of the trust or of the property of the trust and hence the trust property was not property for the purpose of the section 79 proceedings between the husband and wife.
I refer to the following relevant paragraphs:
68.Control is not sufficient of itself. What is required is control over a person or entity who, by reason of the powers contained in the trust deed can obtain, or effect the obtaining of, a beneficial interest in the property of the trust. In our respectful view, it is in that sense, that Finn J speaks of “some lawful right to benefit from the assets of the trust”.
69.Mr Richardson SC on behalf of the wife characterised the EUT as “the puppet” and the husband as “the puppet master”. Yet, if the principles emerging from the authorities are to avail the wife, it was necessary for the evidence to establish that the father was the puppet and the husband was the “puppet master”.
The Brother’s evidence is as to the uncontroversial company and trust structure and the assertion that neither he or his brother have, by themselves, control of the trustee companies or the trusts. Some of the payments and transfers of funds relied upon by the Wife as particulars of a partnership agreement or entitlement of the Husband, they argued, were merely payment to the Husband or his entities for services rendered and reimbursement of expenses the Husband had paid or that were paid on his credit card.
In their response to the Wife’s contentions the PJPs asserted:
13.It is evident from the Wife’s [contentions] that the applicant wife is unable to demonstrate any factual or legal basis to sustain her application to join [the PJPs].
14.Specifically, there is no evidence before the Court in support of the Wife’s contention that the Husband and [the Brother] have operated the Trusts and the [Town L] Property, and other companies and entities, ‘akin to a partnership’, because there is neither any partnership nor anything ‘akin to a partnership’ in existence, and the allegations have no proper basis.
I do not accept those statements at [13] and [14] that was developed into or includes the ‘no facts assertion’ because the particulars of the Wife’s paragraph [21] are consistent with the contention of fact that that the Husband and the Brother “have agreed to conduct businesses and make investments by way of a partnership in which they operate and own [a specified partnership, companies and the two trusts]”[25] and the contention of fact that the Husband and the Brother have “operated their entities jointly, in partnership, with equality, for their mutual benefit...”[26]. Further, the Husband’s evidence in his affidavit is consistent with, and arguably evidence of the “overarching partnership” alleged by the Wife.
[25] Wife’s contentions of law and fact at [20].
[26] Wife’s contentions of law and fact at [21].
PJP’s response to alternative “due administration’ & “due consideration” argument
Properly, senior counsel for the PJPs drew my attention to Woodcock No 2.[27] In Woodcock No 2 the husband was a beneficiary of a number of discretionary trusts and a director or one of several directors of the companies that were the trustees of the different trusts. The function of the various trustees overlapped with a ‘Family Council’ and the husband enjoyed “considerable influence on the Family Council and historically the husband had received distributions of” substantial sums.[28]
[27] [2022] FedCFamC1F 173, Wilson J (30 March 2022) (‘Woodcock No 2’).
[28] See [73].
The case concerned whether the husband’s interest or rights in or of the trusts could be valued. The learned primary judge decided they could be and observed as follows:
5.The husband argued that the interests conferred upon him pursuant to the deeds and amendments thereto were rights but not property. Conversely, the wife argued that the bundle of rights conferred upon the husband represent a concentration of power encapsulated by the equitable right to due consideration and due administration and that those rights constitute property for the purpose of s 79 of the Act.
…
7.As these reasons explain, in my view the husband’s interests under the relevant trusts are capable of valuation and they constitute property, as defined in s 4(1) of the Act, for the purpose of a proceeding for the alteration of property interests under s 79 of the Act.
The PJPs said the great difficulty in valuing the Husband’s rights of due consideration and due administration in the trusts and the difficulty in obtaining or enforcing that value against the trustees meant that there was no point in joining the PJPs. They said that if the Wife wants to value the rights of the Husband as a beneficiary,[29] the mere “chance” or expectation of a distribution, they can retain an expert to attempt that difficult task without the burden on the PJPs of being parties. The point was pressed that the valuation of that “right” or “chance” without the legal right or ability to unilaterally distribute assets or income to himself or as he directs was not the value of the underlying assets that would be attempted to be measured.
[29] Said to more properly be described as “a donee of a power”.
Senior counsel for the PJPs put the point[30]as follows:
[30] His response to the assertion or contention at [25] of the Wife’s contentions of fact and law.
MR GLICK:… but it’s the right to be [considered]– it’s not the asset which is being measured. It’s not the trust assets. It’s the chose in action, being the right to be considered… [so is] that paragraph in the [Wife’s] submissions…
The wife contends the husband’s right to due administration and due consideration is property?
Answer: yes, it is, according to French, Gummow and Hayne JJ in Spry; they said that. But they said it’s a species of property within the definition of matrimonial property. But … I don’t mean this pejoratively – so what? Can it be measured? Can it be valued? You’re not valuing the underlying asset. You’re not valuing the estate…You’re saying what’s the value of your right to be considered; how much value do you place upon it?
So that paragraph doesn’t go anywhere so far as the third party is concerned… [and] does that [valuation] require the third party to be joined? [The answer is] no, your Honour…and they can do that [valuation] anyway.
THE HUSBAND’S CASE
The Husband, in concise submissions from his counsel at the joinder hearing, supported the case of the PJPs and opposed the joinder application.
The Husband does not accept the Wife’s contentions that the trusts are property within the meaning of section 4 of the Act, for the purposes of section 79 of the Act. Further, he does not accept the Wife’s allegation that the Town L property, in the Brother’s sole name, was acquired in the partnership or that 50% of that property is held on trust by the Brother for the Husband.
The Husband’s case at the joinder hearing can be seen from his Response to the Wife’s Statement of Contentions as to Facts and Laws, which includes the following:
14.The authorities are clear as to what the Wife must prove for the Trusts to become property for the purposes of s4 and capable of adjustment under s79 of the Act. That is, the Wife must show that the Trusts are the alter-ego of the Husband, and that [the Brother] was the Husband’s “puppet” and the Husband the “puppet-master”: Harris v Dewell and Anor (2018) FLC 93-839.
15.Even if the Wife could show that the Husband had control of the Trusts (which she cannot because he did not), control of itself is not sufficient to conclude that the corpus of the Trusts should be considered property which is capable of division under s79 of the Act. The Wife must show that the Husband has some “lawful right to benefit from the assets of the trust” as Rees J found in Dewell v Harris and that the Trusts are “an alter ego or device used by the husband for his sole benefit”.
16. The definition of property set out at s.4 of the Act provides:
property means:
(a)in relation to the parties to a marriage or either of them—means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion; (emphasis added)
…
The Wife has not demonstrated, and cannot demonstrate, that the Husband is entitled to the property of the Trusts.
17.Importantly, the Wife does not assert the Trusts were operated for the Husband’s sole benefit, nor does she advance any material fact which demonstrates that the Trusts were used by the Husband for his sole benefit. The Wife’s argument is entirely supposition without any factual basis. It is apparent that she is hoping to conduct a fishing expedition by joining the Trusts and [the Brother].
I understood the Husband’s contentions at hearing to rely on the themes in his evidence as summarised earlier to demonstrate that despite the agreement or understanding of equality between himself and the Brother in their combined business affairs, the Husband could not unilaterally deal with the property of their related business or companies or trusts. The Wife relies upon significant parts of the Husband’s affidavit as evidence of the partnership or overarching partnership she alleges.
The undertaking to be bound as to section 106B application
It was properly conceded by the PJPs that the mere timing of the impugned transfers, resignations and renunciations proximate to the separation of the Husband and the Wife and the section 106B of the Act application gave rise to an arguable basis to join the PJPs to the proceedings as necessary parties. The PJPs did not concede that the impugned transfers, resignations and renunciations were improper, or a sham, or were likely to be set aside pursuant to section 106B of the Act.
To overcome that circumstance that may have otherwise lead to joinder, by their senior counsel, the PJPs proposed to undertake to be bound by the outcome of the section 106B application as between the Wife and the Husband and acknowledged that the Brother would likely be a witness in the Husband’s case. It was asserted that the PJPs could be compelled to produce relevant documents by subpoena. This process of an undertaking instead of joinder was said to be consistent with, and would promote, efficiency in the proceedings consistent with the Court’s rules and practice directions.
Hence, it was said, with the undertaking to be bound as to the section 106B outcome, the participation of the PJPs as parties to the proceeding was not necessary and therefore joinder was not required and the PJPs, in all the circumstances, should not be joined as parties to the litigation.
To give some precision as to the undertaking I will recite the position as put concisely and clearly by senior counsel for the PJPs:
MR GLICK:And the question becomes whether or not…the parties for whom I appear are necessary parties. Now, can I immediately make this concession… I accept the following: on the face of it the transfer of shares between the husband and the second proposal respondent, if it is to be set aside under section 106B plainly involves my client…
The way that one can avoid the necessity of becoming a party for that is to give an undertaking to be bound by the result and we would give that undertaking, your Honour. We will plainly be a witness on the 106B point and we will give an undertaking to be bound by any result without the necessity of joining us... So that my learned friend, of course, can run his 106B case. On the face of it I can understand that case, that the transactions occurred at around the time shortly before the separation and on the face of it does invite a 106B application. Well, we can be bound by the result and your Honour doesn’t have to join us for that purpose….
HIS HONOUR: That’s to the 106B aspect, but not as to the - - -
MR GLICK: Not as to the others.
That undertaking to be bound is a serious consideration and I give it substantial weight.
The later written submissions: Mir v Mir and Genesalio
The PJPs’ and the Wife’s post-hearing further written submissions filed 16 June 2023 deal with the two cases decided after oral submissions, Mir v Mir [2023] NSWSC 408, Ball J (21 April 2023) (‘Mir’) and Genasalio & Genasalio [2023] FedCFamC1F 160, Johns J (26 April 2023) (‘Genasalio’).
In Mir three brothers controlled a highly successful business and the business was conducted through a large number of companies and trusts and one of them, John Mir, sought that the court wind up the business and divide the assets equally between the families of the three brothers. John’s claim had two basis. The first was that the business was carried on as a partnership and that the partnership had been validly dissolved. It was not controversial that, if the first basis was made out, the assets of the partnership would be distributed to the three partners or their families after payment of any debt. The second basis was that the companies through which the business was carried on should be wound up pursuant to the Corporations Act 2001 (Cth). The first basis is relevant to the Wife’s ‘partnership’ case in these proceedings.
In Mir, Bell J referred to Palermo, the primary authority relied upon by the Wife as to the ‘partnership’ aspect. His Honour recited the paragraphs [159]-[162], that are recited above, and observed:
86.It is plain from these paragraphs that the Court of Appeal did not decide that the corporate and trust structures were, or were arguably, consistent with the existence of a partnership. Indeed, the Court of Appeal did not overturn the trial judge’s finding that there was no partnership. Rather, it held that the existence of an agreement having the pleaded characteristics – in particular, an agreement that as between the brothers the rights to capital and income or the burden of losses of the various entities under their individual or collective control were to be dealt with so that the total wealth generated would be shared equally – was not inconsistent with the corporate and trust structures they had established. The court ordered a new trial essentially on the question whether the parties had, as a matter of fact, reached such an agreement. The decision provides no support for the claim advanced by the plaintiffs in this case.
Bell J then further observed as follows:
94.As Zheng v Deng illustrates, it is quite possible for a partnership to hold assets through companies. In that case, the assets of the partnership are the shares in the companies. To the extent that the shares are not held equally by the partners of an equal partnership, it is open to the partners to agree that they are held on trust for the partners in equal shares. …
95.However, the same principles cannot apply where the underlying assets are the subject of a trust. In that case, the rights to the underlying assets are governed by the terms of the trust. They cannot be governed by the terms of a partnership at the same time. Of course, a partnership itself could be a beneficiary of a trust, in which case the rights of the partnership to the trust assets are governed by the terms of the trust. But in the present case, it is not suggested that the partnership is a beneficiary of the various trusts the parties established. Rather, John in substance claims that the real property belonging to the Mir Group is partnership property – that is, it is held on trust for the partners, presumably by the companies in which the real property is vested. But such a trust is inconsistent with the fact that the companies hold the properties on trust in accordance with trust deeds and the beneficiaries of those trusts are not John, George and Tony, or not them alone.
…
97.The point made in the previous paragraph is illustrated by considering the relief claimed by John. John seeks the appointment of a receiver to the partnership for the purpose of winding up the partnership. But if that order is made, what could the receiver do in relation to the various trusts that hold Mir Group property? Even assuming that the receiver could take control of the property held on trust, he could only do so in accordance with the terms of the relevant trust deeds. Then what could the receiver do? John does not and cannot provide an answer to this question. In my opinion, this is a fatal problem with John’s claim that there was an overarching partnership. The parties, on accounting advice, chose a particular structure through which to conduct their business. That structure is inconsistent with the partnership John asserts exists. The fact that George, John and Tony described their relationship as a partnership and may have believed that they were partners cannot alter the position.
Bell J went on further to observe:
102.It may be that the facts on which the plaintiffs rely are sufficient to establish that there was an agreement between George, John and Tony that the Mir Group would be operated in the way described. So, for example, it seems plain that the three brothers agreed that the total profits of the collection of companies, trusts and partnerships that constituted the Mir Group would be divided between them and their families equally. And it seems likely that the brothers agreed for example that to the extent necessary they would procure that members of their families who were on the boards of group companies would vote in a way to ensure that result, and that they were able to deliver on that agreement. It will be necessary to return to this issue in the context of considering the cross-claim. However, no such alternative case was advanced by the plaintiffs in their pleadings and, in the absence of a pleaded case setting out clearly the terms for which the plaintiffs contend, it is neither appropriate nor possible to make findings on those matters except to the extent that those findings may be necessary to deal with the cross-claim.
…
152.As I have said, on the evidence before the Court, there is much to be said for the proposition that George, John and Tony, by their conduct and by instructions given to advisors, impliedly agreed that they would exercise their powers as trustees, directors or partners of Mir Group entities or would procure that members of their families who acted as trustees, directors or partners of Mir Group entities would exercise their powers to ensure that the profits of the group would be distributed equally between the three families. If there was such an agreement, questions arise concerning its status following George’s death and whether it had other terms and other parties (such as family members). However, no party advanced an argument in support of such an agreement. The only agreement advanced by the plaintiffs was a partnership agreement, which had the equal sharing of profits as one of its terms …
…
156.To some extent, however, the situation has arisen because of the way in which the parties have chosen to present their respective cases …
There is both tension and synchronisation between the Court of Appeal in Palermo and Bell J in Mir. Both turn on their own facts and Mir also turns on what was and was not pleaded. To the extent that Palermo and Mir are, at least in part or on one view, in conflict about an agreement or a partnership over trusts, the unanimous position of the W.A. Court of Appeal in Palermo supports the Wife’s case as at least arguable.
In Genasalio, in the context of section 79 proceedings between a husband and a wife, Johns J dealt with the wife’s application to join the husband’s brother and a company, the alleged trustee of a unit trust where the husband was the sole shareholder and director. The sole unitholder in the unit trust was said to be another company as trustee for another trust and the husband’s brother was said to be the sole appointor of that, I assume discretionary, trust. The wife alleged that the husband and his brother acted in partnership to invest and generate wealth for their mutual benefit during the 26 year marriage of the husband and wife. The joinder application was opposed by the husband, his brother and, I infer, the trustee of the unit trust.
In Genasalio the wife relied upon Palermo and sought to establish a similar arrangement as alleged there and the husband and his brother asserted that the wife’s statement of facts and contentions did not sufficiently identify the necessary facts to support her case. Johns J saw Palermo as supporting the wife’s case. That Johns J did so, but subject to the facts to be proved a final hearing, supports the Wife’s ‘partnership’ case here as being arguable.
The wife in Genasalio relied upon Chen & Chen and Ors [2017] FamCA 285 (‘Chen’), a decision of Macmillan J. In Chen it was accepted that any deficiencies in the pleading were “likely a result of the deficiencies in the wife’s knowledge of the husband’s conduct and the financial arrangements during the marriage, rather than a deficiency” in the pleadings.[31]
[31] at [16].
On the joinder application Johns J in Genasalio found that it was not incumbent on the applicant for joinder to establish that it was more probable than not that her claims against the proposed parties succeed. I regard that statement as another of the proper principles that apply to joinder of a party.
The Wife in this case asserts that by reason of Genesalio, it is irresistible that, having regard to the similarity of the pleaded case, that there be joinder here. I regard the assertion of irresistible in this case as an overstatement, as much turned on the facts alleged in Genasalio. But Johns J did identify Palermo as relevant and did not doubt its authority.
The further point of Genasalio, relying on Chen, is that at the point of a joinder application the state of knowledge of the applicant and the state of the proceedings (there it is apparent the proposed third parties had not provided disclosure and it was alleged the husband had failed to make full disclosure) were relevant. In this case it is not suggested that either the Husband or the PJPs have disclosed the relevant documents and information about conduct of the trusts or the acquisition of the Town L property.
I accept the observations of John J in Genasalio as persuasive. Her Honour’s approach is entirely consistent with the observations recited below at [90] of Kirby J in Lindon v Cth (No 2).[32]
[32] Lindon v Commonwealth (No 2) [1996] HCA 14; (1996) 136 ALR 251; (1996) 70 ALJR 541 (‘Lindon v Cth No 2’).
CONCLUSION AS TO JOINDER
I must decide whether or not the Wife has an arguable case that the PJPs would be affected by the ultimate decision and it is therefore necessary for the PJPs to be parties to determine the issues in dispute. The case must be sufficiently arguable to withstand a summary dismissal application. On a summary dismissal application the Wife’s evidence would be taken at its highest unless inherently contradictory or implausible. That does not mean her argument or her contentions would be taken at their highest.
The observations of Kirby J in Lindon v Cth (No 2) are apposite:
4.…If there is a serious legal question to be determined, it should ordinarily be determined at a trial for the proof of facts may sometimes assist the judicial mind to understand and apply the law that is invoked and to do so in circumstances more conducive to deciding a real case involving actual litigants rather than one determined on imagined or assumed facts.
Overarching partnership is arguable
It was not disputed that an interest in a partnership, in the sense of an ordinary or common or garden partnership, would be or may be property of the partners to that partnership. Interests in ordinary or clearly defined partnerships are routinely valued and dealt with as property. Any partner can, by notice to the other partners, cause the partnership to be wound up and cause the surplus or deficiency of income and assets to be distributed between the partners.
The PJPs assert that the decision of the High Court in Rojoda contends that a partner does not have a fixed interest in the underlying assets of a partnership. Hence it was said the alleged overarching partnership with a fixed 50% interest in the assets of the trust could not exist. That a partner’s interest in a partnership was not an interest “in any specific asset other than an entitlement to the partner’s share of the net proceeds from the sale of each asset at the completion of winding up” is “well established” according to the majority in Rojoda.
In Rojoda, Gaegler J, in dissent saw things differently, and observed:
87.… The share of each partner is not a “fixed proportion” that is “immediately ascertainable” but is rather “an indefinite and fluctuating interest, which at any given moment is in proportion to his share in the ultimate surplus coming to him if at that moment the partnership were wound up and its account taken”[33] and which might change from moment to moment. …
[33] Sharp v Union Trustee Co of Australia Ltd (1994) 69 CLR at 551; Perpetual Executors & Trustees Association of Australia Ltd v Federal Commissioner of Taxation (Thomas’ Case No 2) (1955) 94 CLR 1 at 27-28.
That statement is in accordance with the majority. But the continuing part of [87] diverges from the majority statement;
87.… But even then, the share of each partner is “an unascertained interest in every single asset of the partnership, and it is not right to regard him as being merely entitled to a particular sum of cash ascertained from the balance-sheet of the partnership drawn up at the date of dissolution.”[34]
[Citations included as footnotes below]
[34] Maslen v Perpetual Executors Trustees & Agency Co (WA) Ltd (1950) 82 CLR 101 at 129, quoting Manley v Sartori [1927] 1 Ch 157 at 163-164.
Rojoda dealt with the Partnership Act 1895 (WA) but there can be no doubt the Rojoda principles are of universal application to partnerships in Australia. Assuming the “not an interest in a specific asset” statement is part of the ratio of Rojoda, and that this applies to the Partnership Act 1958 (Vic), the majority position is the law applicable to me.
There will be cases where the difference between a fixed interest in specific assets of a partnership and a fixed percentage or share, for example equality or 50%, entitlement on winding up or share in the ultimate surplus coming to the partner, is significant. Rojoda is one such case. In this case, at this point of considering joinder, the difference is not material and neither advances or damages the arguments of either side in this application.
The PJPs addressed me on the basis that the words of [24] of the Wife’s contentions document, “a fixed half interest in the assets of the Trust” meant an interest in specific assets of the alleged partnership, which include the assets of the trusts, and not the “proportion” of the partners share.
The Wife’s counsel did not address me about that point but relied on the general observations in Palermo.
Although the, perhaps subtle, difference between a half interest in specific assets of a partnership, and an interest of half as a proportion of the whole on winding up type interest, was not discussed with me, I accept the PJPs’ contention that Rojoda has settled that question and a partner does not have a fixed interest in specific assets of a partnership. Whether that would be qualified or different if there were agreement or terms to the contrary has not been argued before me notwithstanding what Fullagar J observed at 120 , being part of the passage referred to by the majority in Rojoda.
That does not alter my finding, for the purposes of this joinder application, that it is arguable that if the alleged and arguable contentions of fact are made out, then the Husband’s interest in the alleged, and heavily contested, overarching partnership, is property. That being arguable, the joinder of the PJPs in necessary within the meaning of the Rules.
For the purposes of this joinder application, where relevant disputed facts can only be assumed or hypothesised, and none are proven, I do not accept that the partnership or “overarching” partnership or agreement “akin” to a partnership to operate the companies and trusts so that the Husband and the Brother or each of their families have a 50% interest or entitlement is prohibited or not possible at law. I rely upon the unanimous observations of the Court of Appeal of the Western Australia in Palermo recited above. I also rely upon the observations of Bell J in Mir and particularly at [152]. Both authorities are highly persuasive. At this point, for the purposes of a joinder application, I do not accept that Palermo is a “distraction” as senior counsel for the PJPs assert.
That consequence is that it is arguable that an ‘overarching’ agreement or agreement or partnership as alleged, if proven, binds the Husband and the PJPs and hence it is arguable the Husband’s interest in that partnership or agreement, if proven, is property of the Husband. The assertions of law of the Husband and the PJPs are also arguable.
The consequence of that determination is that the rights of the PJPs may be directly affected by the determination of that issue and the PJPs are necessary parties to the proceedings.
I am not finally determining the complex legal arguments of the parties. I am not determining the factual disputes that are apparent on the materials. I am determining an application for joinder of parties with whom it is alleged the Husband has had a business relationship throughout his marriage to the Wife and with or within whom it is alleged substantial or valuable assets have accumulated.
I do not accept the argument that “there is no contention of fact.” It is arguable that the contentions made and the particulars provided, and provided at an early stage, if made out at trial, would result in a finding that the Husband and the Brother had an agreement, express or inferred, or partnership or overarching partnership to conduct the business, the companies and trusts to provide equality of benefit to the Husband and the Brother. The Wife’s contentions of fact include parts of the Husband’s own evidence of the brothers’ agreement/s and manner in which he and the Brother have conducted their business affairs. The Wife’s contentions are consistent with, and supported by, the Husband’s affidavit evidence of the manner in which he and his Brother have conducted their business affairs.
On a joinder application (or a summary dismissal application), on the papers, I cannot take the explanations of the Husband and the PJPs and their contradictions of the Wife’s contentions and evidence as conclusive evidence of the correctness of what the Husband and the Brother depose to. But they put matters in issue.
I do not accept that as a matter of law a partnership or an overarching partnership or an agreement to conduct business through a partnership and companies and trusts cannot exist or be had regard to. Because of the unanimous statements of law in Palermo, and the observations in Mir referred to, I find that the contentions of law asserted by the Wife are arguable as are those of the PJPs. At final hearing, with the benefit of proof of facts or lack of proof, those contentions of law and their application to the facts then determined, may or may not be made out. But at this point the Wife’s contentions of law and fact are arguable and sufficiently arguable to require the PJPs to be parties to the proceedings.
The potential related questions arising from, or consequences of, the legal and factual findings sought by the Wife and/or the form of the orders to be pressed ultimately have not been pleaded and how those orders would be enforced, if the Wife proves her case, has not been put or argued before me. That is not fatal to the Wife’s application for joinder at this early stage of the proceedings. On the first day of the hearing the Wife asserted that Part VIIIAA of the Act may ultimately be invoked in aid of her case. But whether and how this could or would be done was not argued before me and I do not make any finding about the applicability of Part VIIIAA.
The alternative point: due administration and consideration is property is arguable
I take into account the terms of the trusts. The Husband and the Brother, together, once controlled the trustees and with that control and being the appointors, had very wide powers of amendment as the clauses recited earlier show. If the impugned transactions are set aside, the rights or powers of the Husband would include the power to unilaterally block any distribution of income or capital or development of the assets of the trusts or application of income (other than accumulation) or variation of the terms of the trusts. That power to ‘block’ or veto, together with any other relevant circumstance of the property and history of the trusts, may not be an insubstantial or inconsequential power or right. It may be capable of being valued. The value may rest on proof of facts.
Hence at final hearing, and absent the ‘partnership’ case being made out, to determine the question of whether the bundle of the rights the Husband would hold in the trusts (if the impugned transactions were set aside) is property and/or amenable to section 79 orders and/or the value of that property, or what to do with that bundle or rights, would likely require a consideration of all of those rights and circumstances as well as the history of the income and assets of the trusts. Like on the ‘partnership’ point, at final hearing with the benefit of proof of the particular facts of this case, advancing one case or the other, those contentions of law and their application to the ultimate facts determined, may or may not be made out. However, in the context of a joinder application, the points are arguable and sufficiently arguable to require the PJPs to be parties to the proceedings.
For the purpose of this application I accept the point of the PJPs that no partner of a partnership has a fixed interest in any or all specific assets of the partnership, that no shareholder has a fixed interest in any or all specific assets of the company and no beneficiary has a fixed interest in any or all specific assets of a discretionary trust. But that does not render the Wife’s case, in light of Palermo and Mir, as unarguable or make joinder “unnecessary’ or otiose.
Should the PJPs undertaking avoid joinder?
There may well be cases where an undertaking as proffered by the PJPs would render the joining of the third party unnecessary to determine the issue in dispute. Because the undertaking would only relate to the section 106B setting aside of the impugned transactions and not to the ‘partnership’ issue and not to the ‘it is property’ issue and not to the Town L Trust issue and not as to whether the PJPs would be bound by orders anchored by findings about those issues, I do not accept that the proffered undertaking renders the joining of the PJPs as unnecessary or that it is otherwise in the interests of justice to proceed without the PJPs being parties. Without the PJPs being parties some of the legal and factual issues in this case may be only hypothetical or advisory.
Even with the proffered undertaking as to the section 106B matters, the PJPs participation as parties is necessary for the Court to determine all issues in dispute in the proceeding.
Disclosure orders sought
Counsel for the Husband made clear, and it was not disputed, that specific disclosure orders were no longer sought against his client in the circumstances of correspondence passing between solicitors.
The case against disclosure by the PJPs rested on them not being parties. It was not suggested that, if they were parties, the documents sought were not relevant or not discoverable or that the documents sought had already been provided.
Because I have determined that the PJPs are parties, and therefore the documents sought have not been provided, I will make the orders sought by the Wife for disclosure by the PJPs.
Restraint Injunction
A general restraint against disposing of the assets of the PJPs pending final hearing was sought. The ‘usual’ undertaking as to damages was given by the Wife. The form of that undertaking was not in dispute or discussed. The form of the ‘usual’ undertaking can be found in many authorities[35]. Rules 10.19(3) & (4) contain the undertaking as to damages in this court and it is that form of undertaking, in the rules, that I regard the Wife as making. I recite that undertaking in the orders I will make. The injunction was not sought as to anything that would interfere with the ‘ordinary course’ of business of the PJPs.
[35] See for example Love & Thwaites (No 4) [2014] VSCA 56 at [1] & [55], Nickson & Kessell [2020] FamCA 931 in Annexure A, Beecham Group Ltd v Bristol Laborities Pty Ltd [1968] HCA 1, Ganem & Ganem [2014] FamCA 1177 at [150] and also the Supreme Court of Victoria Commercial Court Practice Note SC CC.
The injunctions were not sought against the Husband, as unless and until the impugned transactions are set aside at final hearing, it was said that the Husband does not have a legal role in the PJPs.
The legal principals of a restraining or asset preserving injunction are stated in many authorities and crisply stated by the Full Court of the Family Court in Tsiang & Wu [2019] FamCAFC 128 as follows:
20.The grant of an injunction is discretionary and the basis on which such an order is made is well established. A purpose, as in this case, is to preserve the status quo pending resolution of the controversy. An applicant must demonstrate first that there is a serious issue to be tried. While that statement has been the subject of various iterations, in essence it requires the demonstration of an arguable case or as was said in Australian Broadcasting Corporation v O’Neill [2006] HCA 46; (2006) 227 CLR 57 at [65], the applicant must “show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo”.
21.Next the applicant must demonstrate that the balance of convenience favours making the order sought. As part of this, the applicant must show that there is a “danger” or risk of dissipation of or dealings with assets which will frustrate any judgment in favour of the applicant.
In this case the opposition to the injunctions by the PJPs rested on the case against the PJPs being insufficient at law for them being joined as parties. I have found that the case against the PJPs is sufficiently arguable for them to be necessary parties.
In this case, because of and for the reasons set out, when dealing with the joiner issue there are serious issues to be tried. They include:
·whether the impugned transactions should be set aside pursuant to section 106B of the Act;
·whether the Husband’s interest in the alleged overarching partnership is property of the Husband;
·whether or not the Husband was indebted to his parents and/or the Brother and how those things should be taken into account in the section 79 property alteration or division proceedings between the Husband and the Wife and whether those allegations explain or justify the impugned transactions; and
·whether the value of the property registered in the name of, or owned by the PJPs, is or may be of substantial value.
Those matters have a sufficient likelihood of success to justify the preservation of that property and those entities, and the Brother’s positions in them, pending final hearing.
Because:
·the impugned transactions were not disclosed to the Wife beforehand;
·the Brother has been a willing party to the impugned transactions;
·the Husband’s explanation for the impugned transactions is highly controversial and may not be accepted at final hearing;
·the Husband’s explanation for the impugned transactions does not descend to any detail of how the impugned transactions, if genuine, disposed of or squared up the alleged debts to family;
·the Brother’s affidavit does not provide his explanation (although he does not dispute the Husband’s explanation) or any detail of how the impugned transactions, if genuine, disposed of or squared up the alleged debts to family;
·the impugned transactions are at or around a time when it is alleged the marriage of the Husband and Wife was in trouble; and
·there is no suggestion that if some part of the assets of the PJPs, including the Town L property, are found to be property of the Husband for the section 79 proceedings, that the remaining assets of the Husband and Wife are sufficient to cover or to adjust any missing or dissipated part of the asset pool;
there is sufficient ‘danger’ or risk of dissipation or dealings with assets and entities which would frustrate potential orders in the Wife’s favour, that the balance of convenience demonstrates that the injunctions as sought by the Wife should be made pending final hearing.
Single expert valuations and the cost thereof
The Wife’s orders sought single expert valuations of the real estate assets, the Trusts’ assets, the Town L property and the property of the Husband and Wife. She sought that the cost be borne equally. The PJPs inferred opposition rested on them not being parties. I was not addressed as to the mechanics and detail of the sharing of cost but the application for single expert valuation is in the shadow of the Rules. The Rules provide as follows:
7.06 Single expert witness's fees and expenses
(1)Unless the parties agree otherwise or the court otherwise orders, the parties (but not an independent children's lawyer) are equally liable to pay a single expert witness's reasonable fees and expenses incurred in preparing a report.
(2)A single expert witness is not required to undertake any work in relation to the expert witness's appointment until the fees and expenses are paid or secured.
[Notes omitted and emphasis added]
It is to the benefit of all parties that all parties be consulted about single experts and invest in the cost of such expert valuation evidence. When joined the PJPs will actually be three of five parties and a literal interpretation would see the PJPs bearing 60% of the single expert costs. I am satisfied that was not the intention behind the Wife’s single expert valuation application. In all the circumstances it is proper, at this stage and in the first instance, to treat the PJPs as one third of the parties and each of the Husband and the Wife as the other third parts. The costs expended on single expert valuations are all subject to the ultimate orders of the judge at final hearing.
CONCLUSIONS AS TO ORDERS
I will otherwise make the orders as ultimately sought by the Wife and make the injunctions on the basis of the undertaking as to damages given by senior counsel for the Wife, save for I have extended the compliance deadlines for disclosure and obtaining valuations to 21 days and 28 days respectively.
I adjourn the matter for Directions Hearing to 16 August 2023 at 2pm before Judicial Registrar V (the docketed Judicial Registrar).
The primary purpose of these reasons is for the parties to understand why the orders have been made. That is an essential function and especially so when section 26(2)(b) of the Federal Circuit and Family Court Act 2021 (Cth) is considered.[36] I am grateful for the industry and assistance of counsel and solicitors in this case.
[36] An appeal must not be brought from a decision to ... (i) join a party.
I certify that the preceding one hundred and twenty-eight (128) numbered paragraphs are a true copy of the Reasons for Judgment of Judge O'Shannessy. Associate:
Dated: 7 July 2023
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