Hamm and Hamm & Ors
[2010] FamCA 1281
•14 October 2010
FAMILY COURT OF AUSTRALIA
| HAMM & HAMM AND ORS | [2010] FamCA 1281 |
| FAMILY LAW – PRACTICE AND PROCEDURE – joinder – application by the wife to join proposed third parties to the proceedings – where there are outstanding property settlement proceedings between the husband and the wife – whether it is necessary to join the proposed third parties – where the wife alleges that she and the husband have a beneficial interest in property belonging to the proposed third parties– whether the wife has established grounds for the imposition of a constructive trust – consideration of the principles established in Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137 – where the Court is satisfied that the wife has established an arguable claim – held that joinder was necessary to determine all issues in dispute – orders that proposed third parties be joined to the proceedings. | |||
| Family Law Act 1975 (Cth) ss 90AE Family Law Rules 2004 rr 6.02 | |||
| B Pty Ltd and Ors & K and Anor (2008) FLC 93-380 | |||
APPLICANT: | Ms Hamm | ||
| RESPONDENT: | Mr Hamm |
| PROPOSED THIRD PARTIES: | Mr A Hamm, Ms B Hamm, C Pty Ltd, |
| FILE NUMBER: | ADC | 3362 | of | 2007 |
| DATE DELIVERED: | 14 October 2010 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Burr J |
| HEARING DATE: | 28 July 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Tredrea |
| SOLICITOR FOR THE APPLICANT: | Rosey Batt & Associates |
| COUNSEL FOR THE RESPONDENT: | Mr Richards |
| SOLICITOR FOR THE RESPONDENT: | Robinson & Mason Pty Ltd |
| COUNSEL FOR THE PROPOSED THIRD PARTIES: | Mr Birchall |
| SOLICITOR FOR THE PROPOSED THIRD PARTIES: | Clelands Lawyers |
Orders
That Mr A Hamm, Ms B Hamm and C Pty Ltd be joined as respondents to these proceedings.
That the wife’s Amended Application in a Case filed on 12 February 2010 be otherwise dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Hamm & Hamm and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: ADC 3362 of 2007
| Ms Hamm |
Applicant
And
| Mr Hamm |
Respondent
And
Mr A Hamm, Ms B Hamm and C Pty Ltd,
Proposed Third parties
REASONS FOR JUDGMENT
Introduction
I have before me for determination an Amended Application in a Case filed by the wife on 12 February 2010 seeking orders that the husband’s parents, Mr A Hamm and Ms B Hamm, and C Pty Ltd (“the proposed third parties”) be joined as Respondents to the property settlement proceedings between the husband and the wife. This Application is opposed by both the husband and the proposed third parties.
The wife instituted proceedings for property settlement in the Federal Magistrates Court in late 2008. The matter was listed for trial before Demack FM in November 2009. However the trial did not proceed. The wife filed an Application in a Case on 6 November 2009 seeking that the trial be vacated to allow for the consideration of her application to have the husband’s parents and C Pty Ltd joined as parties to the proceedings. In that Application the wife also sought orders that the matter be transferred to the Family Court. The matter was subsequently transferred pursuant to the orders of Mead FM made on 26 February 2010.
Background
The husband and the wife are aged 49 and 46 years respectively. They were married in 1986 and separated some 10 years later in 2006. They subsequently divorced on 1 September 2007.
In 1989 the parties moved to reside on farm land at D Town where they lived for the remainder of their marriage. The parties have three sons who are now 22, 20 and 18 years of age.
Central to the dispute between the parties is the farm land on which the parties lived and worked for the majority of their marriage. The farm land is comprised of sections of land belonging to the husband, the husband’s parents and a company controlled by the husband’s parents. The husband is the owner of Sections 1 and 2 District E which he purchased prior to the parties’ marriage. The remainder of the farm land can be identified as Sections 3, 4, 5 and 6 District E in addition to Section 1 of F Town. It is collectively known as the “[C] land”. The registered proprietor of the land is C Pty Ltd of which the husband’s parents are the directors and shareholders.
Approximately two years after the parties’ marriage in 1988, a farming partnership was established between the husband, the wife and the husband’s parents (“the Hamm Partnership”). For the use of the partnership, the husband and C Pty Ltd contributed their individual sections of land and the husband’s parents contributed the farming plant and equipment. It is still known as the Hamm Partnership. The partnership profits were distributed equally between the partners on an annual basis.
After moving there in 1989, the parties spent a large part of their married life in residence on the farm land. The wife alleges that it was agreed between the husband and his parents that the husband and wife would eventually become entitled to the C land. According to the wife, the parties then devoted 20 years to working the farm land in reliance on that agreement. There is some dispute surrounding each party’s involvement in maintaining the farm.
The husband’s parents deny that such an agreement was ever made. However, the husband’s mother conceded in her affidavit filed on 1 March 2010 that there were discussions that the land may be transferred to the husband and wife if she and her husband did not require its use and upon condition that their other children were not disadvantaged.
In 2004 the husband’s parents borrowed $340,000.00 from the National Australia Bank to finance the construction of a house at H Street, G Town (“G Town”). In addition to a mortgage over the G Town property the husband’s farm land was used as security for a loan limited to the amount of $30,000.
It is the wife’s contention that the farm land ought to be brought to account in the property settlement proceedings. It is also alleged by the wife that the G Town property was built so that the husband’s siblings would not contest the disposition of the farm to the husband in the husband’s parents’ wills. The wife seeks a declaration as to her beneficial interest in the farm land and the G Town property. The husband’s parents deny the assertions made by the wife. They are supported in that regard by the husband. The husband’s parents have also since indicated their intention to refinance the mortgage over the G Town property in order to release the husband’s land as security.
The Law
In considering the wife’s application for joinder, I am guided by the provisions contained within the Family Law Rules 2004 and in particular Rule 6.02(1) which reads as follows:-
Rule 6.02 (1) Necessary parties
A person whose rights may be directly affected by an issue in a case, and whose participation as a party is necessary for the court to determine all issues in dispute in the case, must be included as a party to the case.
In the decision of Wayne v Dillon and Anor (2008) 40 Fam LR 543, Warnick J hearing an appeal from the Federal Magistrates Court as a single judge considered the meaning of the word “necessary” in the context of rule 11.01 (1) of the Federal Magistrates Court Rules 2001 which reads:-
Rule 11.01(1)
Subject to any order of the Court, a person whose participation is necessary for the Court to completely and finally determine all matters in dispute in a proceeding must be included as a party in the proceeding.
In that decision, Warnick J concluded at paragraph 18 that:-
The word ‘necessary’ in rule 11.01(1) must mean something more than ‘useful’ or ‘expeditious’. In my view, if there are available alternative means to joinder to the substantive proceedings, of obtaining from a third person or someone already a party what is needed to allow an applicant for joinder to establish an identified ‘case’, joinder is unlikely to be ‘necessary’.
The Court is empowered by section 90AE of the Family Law Act1975 to make far reaching orders which are binding on third parties should it be necessary to do so in order to effect a just and equitable property division between the parties to the marriage. Inter alia, procedural fairness must be accorded to the proposed third parties.
Warnick J in the decision of Wayne v Dillon and Anor (supra) held that in considering an application to join a third party the Court is required to consider whether there are sufficient facts to establish an identifiable claim at law.
17. As seen, while neither that rule nor the relevant Family Law Rule refers to an applicant for leave to join having to establish a cause of action and supporting ‘case’ which, taken at its highest, is arguable, that test was adopted by the parties before Morgan J and by her Honour. That approach was not attacked in the appeal in B Pty Ltd & K (supra). It is a test consistent with the references, in the passages quoted from B Pty Ltd & K (supra), to the need for an applicant for joinder to set out the nature of the claim and the basis of it. As also seen, in Gould v Gould; Swire Investments Ltd (1993) FLC 92-434, Fogarty J particularly referred to the need for fairness to the third party. Any person joined to a proceeding ought, at that point, be able to take advice on whether the facts pleaded (if established) would lead to a successful claim. Joinder to litigation is a serious step with often significant financial consequences.
…..
However, if a cause of action, recognisable at law, against a ‘third person’ is particularised, then it is at least highly likely that joinder will be ‘necessary for the court to completely and finally determine all matters in dispute’. Thus, in an application such as was before the Federal Magistrate, such a question falls for consideration.
In Bishop (2003) FLC 93-144 the Full Court (Nicholson CJ, Kay and Young JJ) said, at page 78,408:-
38. In cases where all that is sought is the joinder of parties, particularly where there is no opposition to it, a judge hearing an application for joinder should be very slow to refuse it. When it comes to the making of final orders different considerations obviously apply, as by that time it will be much clearer as to which issues need to be determined to make appropriate orders under s 79. The reason and purpose for making orders involving third parties should nevertheless be kept firmly in mind.
Their Honours continued at 78,409:-
43. Given the intermingling of the affairs of the parties, given the lack of opposition to the joinder of the parties, given the necessity to determine issues between all of the parties in order for the Court to exercise its principal jurisdiction in the property proceedings, we are of the view that this was a case in which it was proper to have allowed the joinder of the parties as sought by the wife.
44. Her Honour said in paragraph 21 of her reasons for judgment
‘ …. In this situation it is clear that the court can determine and settle the property of the parties (as it had already begun doing) without the granting of this application …..’
We reach the opposite conclusion to her Honour on that point. It appears to us impossible to ascertain the extent of the parties’ assets and liabilities without delving into the issues raised by the wife in her claims against the various parties now to be joined to the litigation.”
In the decision of B Pty Ltd and Ors & K and Anor (2008) FLC 93-380, the Full Court held that the trial judge had fallen into appealable error in allowing an application by the wife for the joinder of a third party where the lack of evidence and material made it impossible to identify the facts the wife was relying upon in making her claim. This left the respondents in the position of having to respond to a claim which lacked detail and specificity. The Full Court said:-
43.In the usual run of applications for alteration of property interests or parenting orders, the fact of marriage or parenthood, accompanied, in respect of the former, by a history of contribution to and acquisition of, property and, in respect of the latter, evidence that relates to any aspect of a child’s interests, is sufficient to make the existence of a ‘cause of action’ apparent. No pleading in the traditional sense is required to identify further facts material to the cause.
44. However, the narrative or descriptive nature of evidence is often unsuited to formulate or particularise a cause of action against a third party. Something resembling a statement of claim will generally be necessary.
45. In Gould v Gould; Swire Investments Ltd (1993) FLC 92-434 Fogarty J (with Nicholson CJ and Finn J agreeing) said (at 80,451):
‘I conclude, consistently with Buckeridge and Barro, that the correct procedure, where an applicant in proceedings under the Family Law Act seeks relief against a person who is a stranger to the marriage or relationship, is to name that person as an additional respondent in the proceeding and set out the nature of the claim and the basis of it in the ordinary way in the application. (emphasis added)’
46. Of relevance to the procedure adopted in the instant case, Fogarty J had also earlier said (at 80,448):
‘ … good case management and fairness to the parties, in particular to a third party, suggest that in appropriate circumstances the claim against a third party, or more particularly the jurisdictional base of that claim, be determined as a preliminary issue where it is appropriate and practical to do so. …’
……
49. In her reasons for the orders permitting amendment, Morgan J did not address the nature of the wife’s deposition, nor attempt to identify the material facts in support of the claim which the wife sought to add. It is at least unusual in respect of an application said to be of the nature of one for summary dismissal that attention is not given to the identification of facts material to the cause of action.
…
52. We do not accept that it is proper to allow joinder of third parties merely upon the formulation of a paragraph in, or to be added to, an application, on the basis that at trial facts to support the application may be asserted and proved. Sufficient facts must be asserted to demonstrate that, if proved, the law arguably provides the relief sought.”
Similarly in the decision of Wayne v Dillon and Anor (supra) Warnick J in allowing the appeal held that the wife had failed to establish a properly particularised claim which was recognisable at law against the third party. His Honour said:-
24. As to the orders sought in paragraph 2(b) and 3, in my view these paragraphs do not disclose any cause of action giving rise to some legal or equitable entitlement of the husband in property held by Ms Wayne.
…
38. Because I consider that a combination of the wife’s application and affidavits does not disclose a cause of action or triable claim, I conclude that the learned Magistrate fell into error in permitting the joinder of Ms Wayne.”
His Honour rejected the argument made by the wife’s counsel that the wife’s affidavit material contained facts which constituted the wife’s claims. His Honour said:-
28. …. While they contain facts upon which it might be asserted that some equitable interest arose in the husband in property now held or once held by Ms Wayne, or that some transaction ought be set aside, in my view it is not for Ms Wayne to endeavour to craft from evidentiary material what the cause of action against her might be”.
Discussion
At the outset of the hearing of this application I had the benefit of having read the written submissions of the parties and I expressed some preliminary views regarding the wife’s Application and in particular, her claim over the G Town property. I indicated to the parties that, in my view, it was unlikely that the wife’s Application would succeed upon that ground and therefore the wife’s Application for joinder would be determined having sole regard to her claim that she and the husband should be entitled to a share of the C land. I asked that Counsel proceed with their arguments on that basis.
In determining the wife’s Application for joinder, the Court is required to consider as a threshold question whether there is a “cause of action or triable claim” (Wayne v Dillon and Anor (supra) at paragraph 38).
The principles of estoppel require that a representation be made and the representee, having reasonably relied upon such representation, suffered detriment. Furthermore, the Court is also required to consider whether it would be unconscionable in the circumstances to refuse equitable relief. In the decision of Commonwealth v Verwayen (1990) 170 CLR 394 Deane J provided a general approach adopted by the courts in considering unconscionability. His Honour said (at paragraph 445):-
Ultimately…the question whether departure from the assumption would be unconscionable must be resolved not by reference to some pre-conceived formula framed to serve as a universal yardstick but by reference to all of the circumstances of the case, including the reasonableness of the conduct of the other party in acting upon the assumption and the nature and extent of the detriment which he would sustain by acting upon the assumption if departure from the assumed state of affairs were permitted.
Counsel for the wife referred me to the decision of Morton v Morton [1999] SASC 368 (unreported, Full Court of the Supreme Court of SA) where it was held that the absence of an “express agreement” between the parties did not prevent the Court from imposing a constructive trust where it was appropriate to do so. Three individual judgments were delivered by the Full Court. Millhouse J said at paragraph 26:-
It is quite inappropriate to analyse words used by people like the parties as though we are construing a document drawn up by lawyers. It would be unfair to rob the respondent of his remedy simply because he has not, could not, express himself with precision and his father may not have either.
In stating his reasons in the same matter, Lander J referred to the High Court decision of Commonwealth of Australia v Verwayen (supra) where Brennan J said:-
…equitable estoppel yields a remedy in order to prevent unconscionable conduct on the part of the party who, having made a promise to another who acts on it to its detriment seeks to resile from the promise.” (paragraph 71)
The wife’s Counsel argued that she and the husband had relied upon, to their detriment, the assertions allegedly made by the husband’s parents. He directed me to various paragraphs of the wife’s affidavit filed on 12 February 2010 in support of this argument. The paragraphs to which I was referred were:-
12. It was agreed between the Husband and the Husband’s parents who are the principals of [C], that the Husband and I would become entitled to own the [C] land, and we devoted approximately 20 years of our working lives farming the [C] land pursuant to that agreement.
13. The agreement made between the Husband, myself and the Husband’s parents was constituted by oral statements made on several occasions, and the actions of the Husband, the Husband’s parents, and myself to this effect constituted as follows:-
…
13.2 Distributions of profits from the farm business partnership [Hamm] (ABN …) has always been on a ¼ basis to each of the Husband, the Husband’s parents and myself, and not directly proportional to the hours worked, and effort put into, the farm business.
13.3 I say that between 1989 and 2009, the hours worked by the Husband and myself on the Farm land and in the farm business has far exceeded the hours worked by the Husband’s parents.
……
13.11 Since the retirement of the Husband’s parents from active participation in the farm business in 2004, and their relocation to a property at [H Street, G Town], both the Husband’s parents continued to draw an equal ¼ share from the partnership profits, even though the Husband’s mother ceased active involvement in farming activities and the Husband’s father retired, and his work on the Farm land was then greatly reduced.
13.12 The Husband now does all of the day to day running of the Farm business, as deposed by him at paragraph 38 of his affidavit filed on 10 December 2008, however the Husband’s parents continue to draw upon a ¼ share of the profits from the Farm business.
14. I say that the Husband and I have an inchoate beneficial interest in the [C land] on the basis of a constructive trust, for reason that it would be inequitable for [C] to assert and retain its legal title to the exclusion of the Husband and I, for the reasons, and upon the basis of the matters set out (above).”
In the course of his submissions, Counsel for the proposed third parties referred me to the well known decisions of Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137 which deal with circumstances where it would be appropriate to impose a constructive trust and indicated that the principles established in these cases did not apply in this situation.
In Muschinski v Dodds (supra), Deane J offered the following commentary on circumstances where an equitable remedy will be granted and said at 619-20:
…the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf Atwood v Maude [1858] LR 3 Ch App 369 at pp 374-275 and per Jessel, MR, Lyon v Tweddell (1881) 17 Ch D 529 at 531
This decision was the pioneering case for the principle of unconscionability and Deane J went on to make the following remarks concerning it:
Notions of what is fair and just are relevant but only in the confined context of determining whether conduct should, by reference to legitimate process of legal reasoning, be characterised as unconscionable for the purposes of a specific principle of equity whose rationale and operation is to prevent wrongful and undue advantage being taken by one party of benefit derived at the expense of the other party in the special circumstances of the unforeseen and premature collapse of a joint relationship of endeavour.”
The High Court ultimately allowed the appeal finding that the husband’s claim for an equal beneficial legal title over the property, in light of the disparity in the parties’ contributions, to be unconscionable. The Court ordered that the property be sold and the parties were to receive their respective contributions and the remainder was to be shared equally between them.
Deane J’s approach was subsequently adopted in the decision of Baumgartner v Baumgartner (supra). The facts in this case were common to those in Muschinski v Dodds (supra) in that it concerned a claim made by a de facto wife that she had a beneficial half interest in a property purchased during the course of the relationship. The property had been purchased in the husband’s name but both parties had worked for the majority of their relationship and pooled their incomes to meet payments towards the mortgage.
On appeal to the High Court the majority examined the circumstances for unconscionability and concluded at 149:
The case is accordingly one in which the parties have pooled their earnings for the purposes of their joint relationship, being to secure accommodation for themselves and their child. Their contributions, financial and otherwise, to the acquisition of the land, the building of the house, the purchase of the furniture and the making of their home, were on the basis of, and for the purposes of, that joint relationship. In this situation, the appellant’s assertion, after the relationship had failed, that the Leumah property, which was financed in part through the pooled funds, is his sole property, is his property beneficially to the exclusion of any interest at all on the part of the respondent, amounts to unconscionable conduct which attracts the intervention of equity and the imposition of a constructive trust at the suit of the respondent.
Ultimately the Court held that the husband held the house on constructive trust for the parties in proportions in which they had contributed their earnings to its acquisition. Gaudron J agreed with the reasoning of the majority who were of the view that in many cases it may be necessary to account for non financial contributions. The circumstances before the Court were those which required such consideration and the wife was credited with the equivalent of three month’s earnings to take into account the time she left employment to have the parties’ child.
Counsel for the proposed third parties distinguished these decisions from the present facts on the basis that, unlike the above decisions, the wife had not contributed in any form other than working on the farm and that contribution had been recognised from her equal share in the farming partnership for the period which she worked on the farm. In Muschinski v Dodds (supra) and Baumgartner (supra), constructive trusts were imposed to acknowledge the contributions made by the party who was being denied the product of that contribution. He argued that that was not the situation before the Court and it was therefore not unconscionable for the husband’s parents to retain full benefit of the C land.
With reference to the above decisions, it was argued for the wife that these were circumstances where it was unconscionable for the husband’s parents to retain full ownership of the C land. It was the wife’s position that she and the husband had dedicated 20 years of their working lives to maintaining and improving the farm land with the belief that one day they would be entitled to it. In her affidavit evidence, the wife says that over the years the husband’s parents made repeated oral statements deposing to this agreement.
In support of her position, she also submitted that she and, in particular, the husband worked sparsely in employment outside the farm. Furthermore in recent times the wife says that she and the husband had taken over the operation of the farm since the husband’s parents’ retirement and that the increased hours they worked were not reflected in the profits they received from the farming partnership.
In response, both Counsel for the husband and the proposed third parties argued that the wife’s Amended Application for joinder relied upon the assumption that the wife would be able to establish an equitable interest in the C land. It was their contention that such a claim could not be established upon the facts.
They argued that in order for equitable estoppel to be found, it required that a clear and unequivocal representation be made and that a statement of a possible future outcome was unlikely to amount to a representation for the purposes of estoppel as held in Mobil Oil Australia v Lyndel Nominees Pty Ltd (1998) 153 ALR 198. While the husband’s mother conceded that there were discussions in which it was indicated that “the C land may be transferred”, Counsel argued that this fell short of the threshold.
They further argued that the wife had not suffered any detriment if such an agreement was found to be in existence. They maintained that the wife had received equal profits from the farming partnership for twenty years despite not having brought anything to the farming partnership when it was formed.
No Counsel made reference to the decision of the High Court in Giumelli and Giumelli (1999) 196 CLR 101. There the High Court indicated that equitable relief in the form of a monetary sum may nonetheless be an appropriate remedy in circumstances which fall short of justifying the imposition of a constructive trust.
Thus, if the facts and evidence elicited at trial support it, the wife may well be entitled to equitable relief in a number of forms.
Conclusion
If I am satisfied that on the hearing of the evidence the wife may make out a claim for an equitable interest in the C land, the subsidiary question becomes one of whether joinder is necessary to determine all issues in dispute and to give effect to orders the Court may make in recognition of the equitable interest. Here, I am satisfied on both counts.
I am satisfied that the material currently before the Court sufficiently sets out the nature of the wife’s claim and the basis for it. Her affidavit filed on 12 February 2010, at paragraphs 12, 13 and 14, does that. I am satisfied that the wife may well establish an equitable interest in the C land. Even if the evidence does not ultimately support the imposition of a constructive trust, equitable relief in the form of a monetary sum may well be indicated (vide Giumelli and Giumelli (supra)).
In my view, the wife having crossed the preliminary threshold of identifying a possible legitimate cause of action, it becomes necessary to join the husband’s parents and C Pty Ltd in order to ascertain the extent of the assets and liabilities of the husband and the wife, identify relevant contributions and Section 75(2) factors and to make orders to do justice and equity between the husband and the wife. The last of those factors may require the Court to make orders against the third parties.
I certify that the preceding forty three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Burr delivered on 14 October 2010.
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