Hankinson & De Vries & Ors - [2013] FamCA 455

FAMILY COURT OF AUSTRALIA

HANKINSON & DE VRIES AND ORS

[2013] FamCA 455

FAMILY LAW – PROPERTY – Practice and Procedure – Amendment to Initiating Application resulting in the joinder of Second and Third Respondents – Where the First Respondent seeks Second and Third Respondents be removed as parties – Where the Second and Third Respondents are not persons whose participation “as a party” is necessary

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Wayne & Dillon and Anor (2008) FamCAFC 204

APPLICANT:

Ms Hankinson

FIRST RESPONDENT:

Mr A De Vries

SECOND RESPONDENT:

Mr B De Vries

THIRD RESPONDENT:

Mr C De Vries

FILE NUMBER:

BRC

6542

2011

DATE DELIVERED:

12 June 2013

PLACE DELIVERED:

Brisbane

PLACE HEARD:

Brisbane

JUDGMENT OF:

Kent J

HEARING DATE:

03 June 2013

REPRESENTATION

SOLICITOR FOR THE APPLICANT:

Zande Law

COUNSEL FOR THE FIRST RESPONDENT:

Mr Hamwood

SOLICITOR FOR THE FIRST RESPONDENT:

Charles Cooper Lawyers

FOR THE SECOND RESPONDENT:

No appearance

FOR THE THIRD RESPONDENT:

No appearance

Orders

IT IS ORDERED

That the Second Respondent and the Third Respondent each be removed as a party to these proceedings.
That within fourteen (14) days, the Applicant file and serve points of claim particularising each and every matter of fact the Applicant relies upon in support of the declaration sought in paragraph 2 of her amended initiating application.
Within 14 days thereafter, the First Respondent file and serve points of defence particularising each and every matter of fact the First Respondent relies upon in defence of that claim.

IT IS FURTHER ORDERED

That the costs of and incidental to this application be reserved to the trial judge.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Hankinson & De Vries and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 6542 of 2011

Ms Hankinson

Applicant

And

Mr A De Vries

First Respondent

And

Mr B De Vries

Second Respondent

And

Mr C De Vries

Third Respondent

REASONS FOR JUDGMENT

The substantive proceedings are for alteration of property interests pursuant to Part VIIIAB of the Family Law Act 1975 (Cth) (“the Act”). The Applicant, Ms Hankinson, born in 1967 is 46 years of age. The First Respondent, Mr A De Vries was born in 1958 and is 54 years of age. The existence of a de facto relationship within the meaning of Part VIII AB is disputed by the First Respondent. He seeks a declaration that a de facto relationship never existed.
By his response filed on 26 September 2011, the First Respondent seeks orders in the substantive proceedings for declarations to the effect that a de facto relationship never existed or, alternatively, did not exist for a period in excess of two years as required by Part VIIIAB. In the alternative, he seeks findings to the effect that the applicant in the substantive proceedings did not make substantial contributions within the meaning of Part VIIIAB.
For her part, the Applicant contends that a de facto relationship commenced in about January 1997 and endured until separation on 27 November 2010, a period of almost 14 years.
Relevant to the present application before me, it does not seem to be in dispute that the assets, liabilities and financial resources legally held by the Applicant and the First Respondent amount to a net of approximately $2.8 million. Within that net pool is the value of the First Respondent’s two-thirds ownership of the shares in the company D Proprietary Limited (“the company”).
The single expert accountant, Mr E has ascribed a value of approximately $205,000 to the First Respondent’s two-thirds ownership which is included in the figure of $2.8 million approximately referred to.
By an amended initiating application filed 20 February 2013 and a further amended initiating application filed 27 May 2013, the Applicant named the First Respondent’s sons, Mr B De Vries and Mr C De Vries as Second Respondent and Third Respondent respectively to those applications.
Between them, the sons legally hold the balance one-third ownership of the company or approximately $100,000 in value via that shareholding. By paragraph 2 of her amended amended initiating application filed 27 May 2013, the Applicant seeks:
That a declaration be made pursuant to section 90SL of the Family Law Act 1975 that full beneficial ownership of all B class shares held by [Mr B De Vries] and [Mr C De Vries] in the company [D] Pty Ltd is held or otherwise is vested in the Respondent Husband [Mr A De Vries].
Importantly for present purposes in respect of the present application, beyond the declaration in paragraph 2 referred to, the Applicant does not seek any consequential order affecting the rights of the Second Respondent and Third Respondent. That is, for example, she does not seek a transfer by either of those persons of their respective shareholdings to the First Respondent. She does not seek in the substantive proceedings, as part of her claim for alteration of property interests, a transfer to her of any shares in the company or orders otherwise affecting the shareholding in the company.
It was confirmed by Mr Zande who appeared on behalf of the Applicant on the application before me, that the Applicant does not seek a transfer of shares in the company as part of the substantive relief she seeks. He referred to the High Court’s decision in Stanford[1] and the step required of identifying existing legal and equitable interests of parties for the purpose of alteration of property interests in a case of this kind.
[1] Stanford & Stanford (2012) FLC 93-518.
As can be seen from the final iteration of the amended amended initiating application of the applicant filed on 27 May 2013 as per paragraph 3, the relief claimed by the Applicant in the proceedings is that she receive assets equivalent to 50 per cent of the divisible net asset pool less the value of assets and taking into account liabilities already in her name.
By an application in a case filed on 1 March 2013 the First Respondent relevantly sought an order in the following terms:
That paragraph 2 of the Amended Initiating Application filed by the Applicant on 21 February 2013 be dismissed.
As I raised with Mr Hamwood of Counsel for the First Respondent on the hearing of the application before me, the making of that order would not seem to achieve what was actually sought by the First Respondent in the application before me, namely the removal of the Second Respondent and Third Respondent as parties to these proceedings. As was argued by Mr Hamwood on behalf of the First Respondent, the essence of the relief sought by the First Respondent was an order that those other respondents be removed as parties to these proceedings.
Paraphrasing and summarising Mr Hamwood’s argument on the application on behalf of the First Respondent, hopefully without doing it too much injury, the gravamen of the First Respondent’s contention is that having regard to:
1.   the overall quantum of the net asset pool at approximately $2.8 million;
2.   the proportion, approximately $200,000, that the First Respondent’s existing two-thirds shareholding in the company bears to that pool;
3.   the proportion, approximately $100,000, that the shareholding of the Second Respondent and the Third Respondent in the company bears to that pool overall;
4.   the consequence that the Applicant’s contention that she receive 50 per cent of the net pool is easily accommodated out of assets other than shareholding in the company which the applicant does not seek in any event; and
5.   the capacity thus for the Applicant’s contention that the shareholding in the company is beneficially held by the First Respondent to be accommodated in the property adjustment orders ultimately made and sought by the Applicant, even if that contention is ultimately made out,
it was not necessary for the Second Respondent and Third Respondent to be parties to these proceedings.
As Mr Hamwood put it, whether it ultimately be concluded that the pool for division be $2.8 million or $2.9 million approximately by including the value of the sons’ shareholdings, the Applicant can still achieve the 50 per cent adjustment of property she seeks in the substantive proceedings from assets other than shareholding in the company.
Importantly, Mr Hamwood acknowledged on behalf of the First Respondent, subject to one matter that I will refer to, that in all the circumstances the Applicant could still agitate at a trial that all shareholding in the company is beneficially owned by the First Respondent without the sons being parties, given that no relief or orders were sought by the Applicant as would affect those parties’ rights consequent upon any finding to the effect that all shareholding is beneficially held by the First Respondent.
The one matter referred to by Mr Hamwood was that rule 6.04 of the Family Law Rules 2004 (Cth) requires that in adding another party to a case, a party must file an affidavit setting out the facts relied on to support the addition of the new party, including a statement of the new party’s relationship, if any, to the other parties. Mr Hamwood referred to paragraph 87 of the Applicant’s affidavit filed 3 April 2013 as the only evidence before the court and available to the first respondent for the basis of the declaration sought by the Applicant:
87. The Husband’s biological sons, [Mr B De Vries] and [Mr C De Vries] area also shareholders and directors of [D Pty Ltd]. My solicitors have informed me that the Historical ASIC search notes that [Mr C De Vries] and [Mr B De Vries] become directors on 15 April 2005, and that they currently hold 25 B class shares each, whilst the Husband owns 99 A class shares. I believe from the ASIC search that [Mr C De Vries] and [Mr B De Vries] were allocated these B class shares also on 15 April 2005. I can recall discussing with the Husband the addition of [Mr B De Vries] and [Mr C De Vries] as shareholders. The directorship and minimal shareholding were given to [Mr B De Vries] and [Mr C De Vries] as a gesture to acknowledge that they had been applying themselves in working hard for the family business and to set up the early states of a succession plan by which the business might ultimately be passed to them when the Husband and I were ready to retire. It was never my understanding that [Mr C De Vries] and [Mr B De Vries] were to be given some form of proportional ownership of the business, but rather it was simply token shareholdings and directorship. The Husband would always say to me that he held a 98% share in the company and [Mr C De Vries] and [Mr B De Vries] held 1% each. I now know that this is not the case. The role and responsibilities of the role remained with the Husband and I, even though I was not formally named as director.
Mr Hamwood drew attention to the fact that even on the case as advanced in that paragraph by the Applicant, it was acknowledged that at least two per cent in total, or one per cent each, was legitimately held by the sons and therefore was at odds with the declaration sought by the Applicant for the whole of the beneficial ownership to be with the First Respondent.
Rule 6.02 in the Family Law Rules 2004 contains the provision for necessary parties to proceedings. That rule is no more than a reflection of longstanding law that the person whose rights may be affected should be a party to the proceedings and has a right to be heard, given matters of procedural fairness and natural justice. However, the focus of the rule, as is the focus of the law, is whether a party’s substantive rights would be affected by the relief sought in a proceeding. Rule 6.02 refers to a person whose rights may be affected as well as a person whose participation “as a party” is necessary for the Court to determine all issues in dispute in the case.
As to participation “as a party” being “necessary” the fact that persons may be necessary witnesses to a particular issue does not mean they are necessary parties to the proceedings. In all the circumstances referred to and, in particular, the fact that the Applicant does not seek relief or orders directly against the Second and Third respondents and, critically, with respect to the shareholding, I am satisfied that the Second Respondent and Third Respondent are not “necessary parties” within the meaning of rule 6.02.
I reiterate that they may well be necessary witnesses on the issue the Applicant seeks to agitate in the substantive proceedings as against the First Respondent, but it does not follow that their “participation as a party” is, within the meaning of rule 6.02, necessary for the Court to determine all issues in dispute in the case.
It seems to me that the distinction can be gleaned from the decision of Warnick J in Wayne & Dillon and Anor (2008) FamCAFC 204 referred to in the written submissions advanced on behalf of the First Respondent, in particular, at paragraphs 18 and 19, albeit that that decision was by reference to the equivalent Rules of the Federal Magistrates Court (as it then was).
Obviously the acknowledgement by the First Respondent on this application in the respects I have identified made on his behalf by Mr Hamwood means that he would be estopped now at any trial of these proceedings from resisting the Applicant’s arguing the contention with respect to the beneficial ownership of the subject shares on the basis that it would not be just and equitable for there to be such a finding in circumstances where there is no consequential relief that would put the shares in the hands of the First Respondent.
That is, it is clear now, on the position advanced by the First Respondent that no point can or will be taken at a trial in resistance to the Applicant’s contention about beneficial ownership resting solely upon the non-joinder or non-inclusion of the Second and Third Respondents as parties to the proceedings.
I am also satisfied that if the Applicant is to maintain a case with respect to the beneficial ownership of the subject shares, that paragraph 87 as it currently stands is insufficient or unfair to the First Respondent in terms of answering her case in that respect.
In respect of costs, it seems to me that, given the issues in dispute and that whilst the Second Respondent and Third Respondent are to be removed as parties, the Applicant has at least achieved the position that the case she can advance at a trial includes the case she agitates for with respect to beneficial ownership of the shares, subject of course to her advancing in the points of claim I have ordered, the cause of action in that respect and subject, of course, to the determination in any further interim application before the Court and ultimately by the trial judge. Each parties’ costs of this application ought be reserved to the trial judge.
I therefore make the Orders as set out at the commencement of these reasons.

I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Kent delivered on 12 June 2013.

Associate:

Date: 17 June 2013