Kayce & Wilda (No 2)
[2024] FedCFamC1F 405
•17 June 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Kayce & Wilda (No 2) [2024] FedCFamC1F 405
File number: MLC 14481 of 2022 Judgment of: STRUM J Date of judgment: 17 June 2024 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Joinder application – Where the applicant seeks to join the respondent’s new wife as the second respondent and the company of which she is the sole shareholder as the third respondent – Where the joinder application is opposed by the respondent and the proposed second and third respondents – Where the applicant seeks a declaration that the respondent has an equitable interest in the company but no alteration of interests thereof – Where the applicant seeks an equal division of the respondent’s and her property and financial resources –Where the applicant does not contend that that, even if successful in her claim against the proposed second respondent, the property of the applicant and the respondent is insufficient to satisfy her claim – Where there have been undisclosed financial dealings between the respondent and the proposed second respondent – Where the respondent failed to make disclosure of his disposition of a substantial life insurance payment to the proposed second respondent – Where the applicant’s joinder application nevertheless does not presently satisfy requirements of r 3.01 of the Federal Circuit and Family Court of Australia Rules 2021 – Where the joinder application has been unsuccessful. Legislation: Family Law Act 1975 (Cth) ss 78, 79, 90AE
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 rr 1.05, 3.01, 3.03
Cases cited: Arnold & Arnold [2021] FamCA 226
B Pty Ltd and Ors & K and Anor (2008) FLC 93-380
Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279
Galante & Galante and Ors [2019] FamCA 756
Gould & Gould & Swire Investments Ltd (1993) FLC 92-434
Hankinson v De Vries and Ors (2013) 50 Fam LR 79
John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1
Jones v Dunkel (1959) 101 CLR 298
Jordan & Sutton (No 2) [2022] FedCFamC1F 850
Pencious & Pencious [2010] FamCA 605
Quincey & Quincey [2024] FedCFamC1A 30
Wayne & Dillon and Anor (2008) 40 Fam LR 543
Division: Division 1 First Instance Number of paragraphs: 45 Date of hearing: 28 March 2024 Place: Melbourne Counsel for the Applicant: Mr Schmidt Solicitor for the Applicant: Blackwood Family Lawyers Counsel for the Respondent: Mr Dickson KC Solicitor for the Respondent: Sayer Jones Counsel for the Proposed Second and Third Respondents: Dr Matta Solicitor for the Proposed Second and Third Respondents: Barry Nilsson Lawyers ORDERS
MLC 14481 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS KAYCE
Applicant
AND: MR WILDA
Respondent
MS MODESTO
Proposed Second Respondent
J PTY LTD
Proposed Third Respondent
ORDER MADE BY:
STRUM J
DATE OF ORDER:
17 JUNE 2024
THE COURT ORDERS THAT:
1.Paragraphs 3, 4, 5, 7 and 14 of the orders sought in the applicant wife’s amended Application in a Proceeding filed 29 February 2024 be dismissed.
2.Paragraphs 8, 9 and 11 of the orders sought in the amended Application in a Proceeding be dismissed insofar as they refer to and/or seek relief against the proposed second and third respondents.
3.The amended Response to an Application in a Proceeding filed 22 March 2024 by the proposed second and third respondents be dismissed, save as to costs.
4.The balance of the amended Application in a Proceeding and the respondent husband’s Response to an Application in a Proceeding filed 22 March 2024 be otherwise adjourned for hearing and determination by a Senior Judicial Registrar on a date to be fixed.
5.Any applications for costs of and incidental to the dismissed paragraphs of the applicant wife’s amended Application in a Proceeding, including by the proposed second and third respondents, be adjourned to a date to be fixed after the making of final orders in this proceeding.
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).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Kayce & Wilda has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
STRUM J
INTRODUCTION
By amended Application in a Proceeding filed 26 March 2024, the applicant wife (“the wife”) relevantly, for present purposes, seeks to join Ms Modesto (“Ms Modesto”) and J Pty Ltd (“J Pty Ltd”), as second and third respondents to the proceeding (“joinder application”).
Ms Modesto is the new wife of the respondent husband (“the husband”) in this proceeding and the sole shareholder of J Pty Ltd. If Ms Modesto and/or J Pty Ltd are joined to the proceeding, the wife seeks various heads of interlocutory relief against them. The final relief sought by her against them is addressed below.
The joinder application is opposed by the husband, in his Response to an Application in a Proceeding filed 22 March 2024. It is also opposed by Ms Modesto and J Pty Ltd, in their amended Response to an Application in a Proceeding filed 26 March 2024.
By her amended Initiating Application filed 22 February 2024, the wife relevantly seeks, at paragraph 3 thereof, that:
3.Pursuant to section 78 of the Family Law Act (Cth), the Court declares that the current equitable interests of the parties in [J Pty Ltd] as follows:
(a)More than 0%, such amount to be particularised pursuant to paragraph 4(d) to the Respondent Husband.
(b)Less than 100%, such amount to be particularised pursuant to paragraph 4(d) to the Second Respondent.
She further relevantly seeks, at paragraph 4(d), that she be excused from particularising, inter alia, her “position in relation to the percentage equitable interest of the parties in” J Pty Ltd, pending the husband’s “compliance with his duty of disclosure and valuations of assets of the property pool” (sic).
She seeks, at paragraph 5, that the husband pay to her “such sum as is required to affect a 50/50 division of the parties’ property and financial resources”. Although she seeks to join Ms Modesto and J Pty Ltd, the reference to “the parties’ property and financial resources” (emphasis added) can only be to that of the husband and her.
She seeks no other final relief in relation to Ms Modesto or J Pty Ltd other than that, in the event of default, she seeks, inter alia, at paragraph 12(c), “further orders to be particularised in relation to the husband’s interest in the Entities”, which are defined to include J Pty Ltd. However, at present, that would be insufficient to warrant their joinder, without more.
LEGAL PRINCIPLES
Rule 3.01 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”) provides:
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.
Rule 3.03(2) of the Rules provides:
A party may add another party after a proceeding has started by amending the application or response to add the name of the party.
Rules 3.03(4) of the Rules provides:
A party may only add another party after the first court date with the leave of the court.
The “first court date”, to which reference is made in r 3.03(4) of the Rules, is defined in r 1.05(1) of the Rules to mean “the first hearing or other court event after an application or an appeal is filed (including a conference or procedural hearing)”.
It is common ground that leave of the Court is required for the wife to join Ms Modesto and/or J Pty Ltd as parties to this proceeding.
The requirements for joinder in r 3.01 of the Rules are conjunctive. A person must be included as a party to a proceeding if: (a) their rights may be directly affected by an issue in the proceeding; and (b) their participation as a party is necessary for the Court to determine all issues in dispute. See Pencious & Pencious [2010] FamCA 605 at [4], per Cronin J.
The gravamen of the wife’s joinder application, and the opposition of the husband, Ms Modesto and J Pty Ltd thereto, is whether or not the rights of the proposed further respondents “may be directly affected by an issue in” the proceeding and, if so, whether their participation as parties “is necessary for the Court to determine all issues in dispute in the proceeding”.
In Gould & Gould & Swire Investments Ltd (1993) FLC 92-434 at 80,451, Fogarty J, in the Full Court, said 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” (emphasis added).
However, the subsequent inclusion of the word “necessary” in r 3.01 of the Rules is significant. As Warnick J said in Wayne & Dillon and Anor (2008) 40 Fam LR 543 at [18], that word (albeit in the context of the similar provision in the former Federal Magistrates Court Rules 2001) “must mean something more than “useful” or “expeditious””. His Honour continued:
… 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”.
Further, in Arnold & Arnold [2021] FamCA 226, Carew J said at [50]:
In my view, and contrary to the submissions of the wife, when considering whether a party is “necessary”, it is relevant to consider whether or not the proposed order is “necessary”. To find otherwise, would suggest that as long as an order against a third party required something to be done, no matter how absurd, the party was “necessary”.
As to any need for particularisation of the claim against a proposed third party, in my view, there is no immutable rule or requirement in this Court that, in every such case, “[s]omething resembling a statement of claim will generally be necessary”: B Pty Ltd and Ors & K and Anor (2008) FLC 93-380 at [44]. This Court is not a court of pleadings. Even where pleadings have been ordered and/or filed, proceedings in this Court are determined on the evidence, and not the pleadings.
In Quincey & Quincey [2024] FedCFamC1A 30 at [28], Tree J referred to Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 296–297, where Dawson J said:
It is, of course, the purpose of pleadings to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings upon trial may be conducted in an orderly fashion by reference to those issues. The defined issues provide the basis upon which evidence may be ruled admissible or inadmissible upon the ground of relevance. But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings. It is incumbent upon the trial judge to see that the pleadings or particulars are amended so that the record reflects the proceedings as they have been conducted, but his failure to do so will not result in the invalidity of those proceedings: Dare v Pulham (1982) 148 CLR 658 at 664; Water Board v Moustakas (1988) 62 ALJR 209 at 211; 77 ALR 193 at 197; Leotta v Public Transport Commission (NSW) (1976) 50 ALR 666 at 668; 9 ALR 437 at 446; Maloney v Commissioner for Railways (NSW) (1978) ALJR 292 at 295; 18 ALR 147 at 151.
(Emphasis added by Tree J)
Tree J continued at [29]:
Both before and after that decision, many other cases have stated identical principles, of which Prysmian Cavi E Sistemi SRL v Australian Competition and Consumer Commission [2018] FCAFC 30 at [69]–[73] (adopting Betfair Pty Ltd v Racing New South Wales [2010] FCAFC 133 at [50]–[52]) is but one example.
See also Jordan & Sutton (No 2) [2022] FedCFamC1F 850 at [78], per Harper J.
In that latter case, at [38], albeit in the context of an application to join third parties for the purpose of making orders against them pursuant to s 90AE of the Family Law Act 1975 (Cth) (“the Act”), Harper J referred to John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at [131], where the High Court stated that where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of the non-party, the non‑party is a necessary party and ought to be joined.
At [39] – [41], Harper J continued:
39.It does not matter whether a proposed party wishes to participate in a proceeding: Arida v Arida [2015] NSWCA 170, per Sackville AJA at [19] (with Bell P and Macfarlan JA agreeing).
40.It is well settled that, applying these principles, it can be appropriate to join third parties to a marriage to proceedings in this Court, for example, to bind them in respect of declarations as to property interests pursuant to s 78 or as ancillary to the exercise of discretion in s 79 or s 106B to set aside dispositions: Valceski v Valceski (2007) 70 NSWLR 36 at [31]–[33]; Khalif & Khalif (No 2) [2021] FedCFamC1F 308 at [37]. Clearly, according to these principles, the existence of claims for orders affecting the rights or interests of third parties proposed to be joined usually compels the conclusion that those parties are “necessary”. Such joinder is, nonetheless, an exercise of the Court’s discretion.
41.Under the Act and the Rules, there is no special procedure or regime for representative proceedings, as in some other court. Joinder of parties is dealt with at several places. For example, in the Act, s 79(10) grants an entitlement to various classes of person to be joined as parties. These include creditors and any other person whose interests would be affected by the making of an order pursuant to s 79. No party here relies on this provision.
After considering a number of authorities, his Honour said at [59] – [61]:
59.In light of these authorities, I agree that the provisions of Pt VIIIAA are themselves not directed to joinder, although they can be used to make orders affecting the interests or assets of third parties to the marriage who participate in the proceedings but are not parties. I did not understand the wife to argue to the contrary. Rather, joinder is dealt with in the relevant parts of the Rules or under the general law. The question for the Court under r 3.01 will always be whether, in all the circumstances, joinder of third parties is “necessary”. Ultimately this is no different to the essential question posed to the Court by application of ordinary general law principles concerning joinder. Once the Court is satisfied that joinder is necessary, it will be ordered either under the mandatory terms of r 3.01 or in the exercise of discretion under the general law.
60.It was the tenor of the respondents’ submissions that affording procedural fairness to third parties largely determined the question of necessity. I do not accept this is correct. Procedural fairness is clearly essential for third parties, and required by both s 90AE and s 90AF. The existence of the provisions of Pt VIIIAA may serve to limit the circumstances in which a finding of necessity should be made. However, the issue of necessity of joinder can only be addressed by considering all the circumstances of the case, which include affectation of the third parties’ interests or assets, questions of prejudice and case management issues. Procedural fairness does not involve a fixed body of rules to be applied in a formulaic manner: Vines v Australian Securities and Investments Commission (2007) 73 NSWLR 451 at [59]. It is question of avoiding practical injustice: Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam (2003) 214 CLR 1 at [37]. There is an obvious overlap between the exercise of case management powers and avoiding practical injustice. I observe that case management powers are often more effectively exercised over parties to the proceedings.
61.In relation to the impact of Pt VIIIAA on the necessity for joinder, the difficulty is identifying to what extent its provisions may be said to limit the necessity for joinder. In that regard, senior counsel for the wife characterised the argument of the third parties (above at [54]) as reductive to the point of futility. Its logical consequence was that, in the context of Pt VIIIAA relief, joinder of the third parties would always be unnecessary because “for all intents and purposes, [the third parties] are going to be treated as parties, therefore, they will be accorded procedural fairness, therefore, the orders will be binding against them” (Transcript 10 October 2022, p.2 lines 42–44). In other words, there is no necessity to join the third parties because in all material respects, they will be treated as parties without joinder. As the wife argued, the contentions of the third parties, if correct, would mean there would never be a necessity to join third parties to resist orders made pursuant to s 90AE because they could be treated as parties for all intents and purposes, but not be joined. While I accept that a claim to the exercise of the powers in s 90AE in respect of the rights and interests of third parties does not necessarily require joinder, it is likely there will be circumstances where it does…
His Honour continued at [62] – [69]:
62.An approach of treating third parties as parties in all material respects without joinder is not convincing. In my view, it emerges that the question of the necessity for joinder of third parties, where relief is sought pursuant to s 90AE, will be answered most readily by considering aspects of prejudice and case management considerations.
63.The wife submits that there will be no obvious greater efficiency or lesser cost involved in simply treating the third parties as if they were parties to the proceeding, to discharge the onus that they have been afforded procedural fairness. Rather, such a course of action may bring with it all the ordinary procedural issues with the additional onus and ambiguity associated with determining whether the third parties have been afforded procedural fairness. I generally accept this argument.
64.It is argued by both the husband and the Fourth Respondent that in this matter, the 65 parties the wife seeks to join will have no interest in many of the matters in dispute between the husband and wife. Joinder would require them to deal with considerable amounts of material and evidence not relevant to the discrete issue to which they are interested. Doing so is likely to be “onerous and cumbersome” for the individual shareholders.
65.The Noteholders argued that they would be prejudiced if they are formally joined. Senior counsel for the Noteholders argued in their case outline that:
59.… if joined, it would be incumbent on the [Noteholders] as parties to the proceedings to review all of the voluminous correspondence, attend all case management and interlocutory hearings and attend the final hearing…notwithstanding that most of the correspondent and most of those hearings may have limited bearing on their interests. This would cause the [Noteholders] to incur substantial legal costs in circumstances where it would be unlikely that [they] could assist the Court in the resolution of the majority of the issues raised…
66.It was argued that any prejudice otherwise arising from the burden of joinder could be avoided in a number of ways without joinder. First, by requiring the wife to plead her claims against them and identify the evidence in support. Doing so would put the third parties, the Court, and the husband on proper notice, thus affording the third parties procedural fairness without imposing on them the onus or cost associated with being joined as a party to the proceedings. I do not see how ordering a pleading would obviate the need for joinder. As Warnick J commented in Wayne (above at [51]) greater particularisation is likely to favour joinder. Secondly, it “would be open to the Court to grant leave for the [Noteholders] to make submissions and file evidence on those points”, which may affect their rights at the appropriate time (Noteholders’ case outline, paragraph 50). I see no force in this argument either. It is another aspect of third parties being parties in all but name.
67.The Noteholders also argued the question of their joinder was premature. They submitted that the wife has not demonstrated why it is necessary to join their clients at present in order to determine “all issues in dispute in the proceedings” in circumstances where the issues affecting the third parties are likely to be discrete, and that will only become relevant in circumstances where the relief sought by the wife, with respect to the shares, enliven the pre-emptive provisions in the Shareholders’ Agreement and the Note Subscription Agreement. It was argued that while it may become necessary in the future for the Noteholders to be joined to the proceedings, to do so now would be premature.
68.I do not accept that joinder of a third party is only necessary where that party has an interest in respect of all issues. It is not uncommon in a case with numerous parties for some of them to have an interest in a limited number of issues. The requirement of the rule to compel joinder is to enable the Court to determine and dispose of all issues in the proceedings. The presence of a third party may be necessary as a party only for some issues as part of this process. Nor do I think the question of joining the Noteholders is premature. The trial is listed to commence in February 2023. The present formulation of the wife’s claim discloses the area of debate where the interests of the Noteholders are relevant and could be affected. If they should be joined, it is appropriate for this to happen as soon as possible.
69.The wife pointed to a number of possible sources of prejudice to her if the third parties are not joined. It exposes the wife to the risk that the orders of this Court, which are intended to be binding on the third parties, may not be enforceable in the event of insolvency as it leaves open the argument that the third parties were not afforded procedural fairness as they were not joined as parties, irrespective of their level of participation in the proceedings or their desire, or in this case, lack of desire, to be joined. Senior counsel for the wife took me to In the matter Glenvine Pty Limited (2020) 160 ACSR 473 and In the matter of ZH International Pty Ltd (in liquidation) [2022] NSWSC 2 in which such an argument was successfully advanced. Senior counsel for the wife argued that while at present there is no argument of imminent liquidation, there is a risk of there so being if the third parties are not joined, and as small as that risk is, that risk is sufficient to sway the Court towards joinder if all else is neutral. While this may be true, as a form of prejudice I find it to be remote and not persuasive on the question of joinder.
Harper J concluded at [75] – [78]:
75.The fact that s 90AE issues may appear largely discrete from other issues in the matrimonial cause between the spouse parties does not mean that at present they can be treated as entirely separate. For example, the conclusion required by s 90AE(3)(a) is that the orders are reasonably appropriate “to effect a division of property between the parties to the marriage”. Consequently, the overall division of property between the spouse parties is inevitably connected to and bears upon the exercise of the powers in s 90AE. So does the question of whether orders are just and equitable (s 90AE(3)(d)). The Shareholders or Noteholders may decide they should cross examine the wife or experts about, and make submissions about, the overall division of property. It would be unusual for non-parties to be permitted to cross examine parties, and the very fact they may apply to do so begs the question of why they should not be joined…
76.These considerations in my view lead to the conclusion that the participation of the Noteholders as parties is necessary, and they should be joined. I will order their joinder.
77.This does not inevitably mean they must participate in all aspects of the hearing of the issues. The Noteholders can form their own view about the extent to which they participate. However, although they presently disavow any need to involve themselves in a number of issues between the husband and the wife, such as contributions during the relationship, it is open to them as parties to seek to cross examine the husband and the wife and to make submissions on such issues as part of their resistance to any orders binding them pursuant to s 90AE.
78.I see no purpose in ordering a pleading at this stage. Senior counsel for the wife made clear the nature of the relief sought against the third parties (above at [35]). However, this does not preclude a later conclusion that a pleading should be ordered.
Important, in my view, is the dicta of Harper J at [40] that it can (rather than will) be appropriate to join third parties to a marriage to proceedings in this Court, for example, to bind them in respect of declarations as to property interests pursuant to s 78 of the Act but that joinder is, nonetheless, discretionary.
DISCUSSION
I therefore turn to consider the conjunctive requirements of r 3.01 of the Rules, namely, whether the rights of the proposed further respondents may be affected by an issue in the case and, if so, whether their participation is necessary to enable the Court to determine all issues in the case.
The declaration sought by the wife pursuant to s 78(1) of the Act is, at best, unusually drawn. She seeks that “the current equitable interests of the parties”, namely, the husband and Ms Modesto (as will become apparent) in J Pty Ltd be declared to be:
·in the case of the husband, “[m]ore than 0%”; and
·in the case of Ms Modesto, “[l]ess than 100%” –
and that the wife be excused from particularising her “position in relation to the percentage equitable interest” of the husband and Ms Modesto in J Pty Ltd.
It will be readily apparent that, on no view of the wife’s case, could it be said that she meets the requirements of r 3.01 of the Rules insofar as her application to join J Pty Ltd as a third respondent is concerned. It cannot be said that the rights of J Pty Ltd, a company, “may be directly affected by” the declaration sought, no matter how unusual the form thereof. She does not seek any final relief against J Pty Ltd. Similarly, it cannot be said that the participation of J Pty Ltd is necessary for the Court to determine all (or, indeed, any) issues in dispute in the proceeding. That is because the wife merely seeks a declaration that Ms Modesto’s 100 per cent legal interest in J Pty Ltd is not co-extensive with her equitable interest therein and that she holds some part of her legal interest upon trust for the husband. Even in the event of default, at present, all that the wife seeks is “further orders to be particularised in relation to the husband’s interest in the Entities” (emphasis added), which are defined to include J Pty Ltd. However, no relief is sought against that company, for example, under s 90AE of the Act. Accordingly, paragraph 4 of orders sought in the wife’s amended Application in a Proceeding, by which joinder of J Pty Ltd is sought, must and shall be dismissed.
Insofar as the joinder of Ms Modesto as a second respondent is concerned, the wife, in her affidavit filed 22 February 2024, refers to a number of financial transactions between the husband and Ms Modesto which, perhaps unsurprisingly, excite her interest, prima facie. These include the undisclosed transfer by the husband, in early 2023, of 4,912 shares in L Group Pty Ltd, held by M Pty Ltd, of which he is the sole director and shareholder, to J Pty Ltd, for no consideration, leaving him with only 1,566 shares. The wife deposes that, prior to the share transfer, the estimated value of the whole of the shareholding in L Group Pty Ltd was in the order of over $18,500,000. On 15 June 2023, the husband consented to an order to use his best efforts to secure the re-transfer of the shares, and this has apparently occurred.
The wife also deposes to other, allegedly undisclosed, share transfers by the husband, or at his direction, to J Pty Ltd, as well as other financial dealings between Ms Modesto and him, the effect of which, she asserts, is to reduce the assets available for division by the Court between the husband and the wife. However, it is not suggested by her that, even if successful in her claim against Ms Modesto, the property of the husband and the wife is insufficient to satisfy her claim. Indeed, other than the largely meaningless declaration sought by her, she does not presently seek any relief in relation thereto.
Further, in October 2023, the wife caused a number of subpoenas to be issued for the production of documents in relation to Ms Modesto. Both the husband and Ms Modesto each filed Notices of Objection in relation thereto. The husband subsequently withdrew his notice; however, Ms Modesto maintained her objection. On 13 December 2023, I dismissed Ms Modesto’s Notices of Objection and ordered her to pay the wife’s costs of and incidental thereto. Had I not done so, it is possible that at least some of the transactions between the husband and Ms Modesto may not have come to light.
In his affidavit filed on 22 March 2024, at paragraph 94, the husband extremely belatedly disclosed that, unbeknownst previously to the wife, in early 2022, more than two years earlier, he had received the sum of $2.3 million, pursuant to a life insurance policy. This was in circumstances where he had been diagnosed with a terminal illness in mid-2020 and had been advised by his treating specialist that he had a limited life expectancy. He deposed that, of the life insurance payment, he retained $100,000 and directed to $2.2 million to be paid into a B Bank account in the name of Ms Modesto, to which he asserts he does not have access. Further, he deposed “I now appreciate that this policy and its payout is something I should have disclosed to [the wife] and to the Court before now. I apologise to both [the wife] and the Court for my failure to do so”. Nevertheless, there is no application by the wife, as against Ms Modesto, to set aside that disposition by the husband in her favour. Presumably, that (and the other transactions) will be the subject of cross-examination of the husband and, it may reasonably be anticipated, Ms Modesto at trial (as to which see [39], below).
Ms Modesto has affirmed two affidavits, both being on her own behalf and on behalf of J Pty Ltd, filed on 1 March 2024 and 22 March 2024. They are largely silent in relation to the wife’s numerous complaints regarding the transactions between the husband and her. In her first affidavit, at paragraph 11, she merely deposes that the wife’s case against J Pty Ltd and her “is unclear” and that she does not know precisely what final relief the wife seeks against them or the basis thereof. Superficially, she is correct. However, given the matters deposed to by the wife, it would have behoved her to respond substantively to those complaints. In her second affidavit, she purports to “correct and clarify” evidence to which she deposed in an earlier affidavit, filed on 8 December 2023, in support of her Notice of Objection to the subpoenas issued at the behest of the wife. Like the husband, she only disclosed, for the first time, the disposition of by him to her of $2.2 million from his life insurance policy in her affidavit filed on 22 March 2024, albeit that she was aware of it for more than two years. She does not explain why she did not disclose it in her first affidavit, filed on 1 March 2024 or, indeed, in her affidavit filed on 8 December 2023. It may be that they both only disclosed that transaction, in their respective affidavits filed on 22 March 2024, because it otherwise would have been discovered by the wife in the documents produced upon the subpoenas to which they had both initially objected and in respect of which Ms Modesto maintained her objection, ultimately unsuccessfully. It may also be that they objected to the wife’s subpoenas in the knowledge that the transaction, which had not hitherto been disclosed by the husband, would otherwise be discovered by the wife. However, at the present juncture in this proceeding, I do not know.
At paragraph 4 of her second affidavit, Ms Modesto deposes that the sum of $2.2 million was deposited into her B Bank account number ending #...32 on or about 7 January 2022 to provide her with funds with which to pay the husband’s “medical, lifestyle and other expenses”. She continues, at sub-paragraph (c) thereof:
At the time I had received the sum, [the husband] had been separated for somewhere between 1.5 - 2 years, and our relationship had well and truly endured for over 1 year earlier. I considered the sum provided to me to be a gift from [the husband] in recognition of the financial burden placed on me to pay for experimental medical treatment as well as holidays and experiences to ensure that [the husband] could prolong and enjoy what little time he had. These expenses included, for example:
(i) experimental medical treatment;
(ii) a new […] motor vehicle;
(iii) renovation expenses;
(iv) a trip [overseas] with [the husband’s] sister, brother-in-law, and niece; and
(v) other holidays.
There is presently no explanation, either by the husband or by Ms Modesto, as to why this was thought to be necessary. Presumably by way of some (possibly) misconceived defence for, or explanation of, the husband’s and her failure to disclose that substantial disposition, she deposes that they spent approximately $1.5 million of the life insurance payment disposed of by him to her, prior to the commencement of this proceeding. As a non-party to the proceeding, Ms Modesto had no obligation per se to make disclosure; that obligation fell upon the husband. However, in circumstances where she filed an affidavit on 8 December 2023, in support of objections to the wife’s subpoenas, and a further affidavit on 1 March 2024, in support of her opposition to the joinder of J Pty Ltd and her to the proceeding, I consider it was incumbent upon her, and misleading of her, not to have disclosed this substantial disposition by the husband to her in her two earlier affidavits. The real reason why she did not do so might be contained in the final sentence of paragraph 4(d) of her affidavit filed on 22 March 2024, namely: “I understand that the documents produced in response to the subpoenas which [the wife] caused to be issued identify this. They show the transactions and balance”.
In support of Ms Modesto’s opposition to joinder, her Counsel, in his outline of submissions, refers to the decision of Kent J in Hankinson v De Vries and Ors (2013) 50 Fam LR 79 at [18], where his Honour, in considering the predecessor to r 3.01 of the Rules (namely, r 6.02 of the former Family Law Rules 2001), said that “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”. His Honour at [19] drew a distinction between joining a party who may be a “necessary witness”, as opposed to a “necessary party”, saying:
As to participation “as a party” being “necessary”, the fact that persons may be necessary witnesses to a particular issue does not mean that 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 or 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.
Clearly, if at trial, in the absence of any further amended Initiating Application by the wife which may render the joinder of Ms Modesto mandatory, the husband fails to adduce evidence from Ms Modesto, it may be reasonably anticipated that the wife will invite the Court to draw an adverse inference therefrom: see Jones v Dunkel (1959) 101 CLR 298. Whether the Court will do so remains to be seen.
Counsel for Ms Modesto also referred to Galante & Galante and Ors [2019] FamCA 756 at [36] – [38], where Berman J said:
36.The critical consideration is that a party can only be considered a necessary party if an order is sought against them.
37.The argument put in opposition to the joinder of the second, third and fourth respondents is that no order is sought against them and given the size of the asset pool as conceded by the husband, even if successful in her claim against the second, third and fourth respondents, the property of the parties is sufficient to satisfy the wife’s claim.
38.No substantive relief is sought against the second, third and fourth respondents and as such there is no utility in their joinder.
As in that case at [37], it is not suggested by the wife in the present case that, even if successful in her claim against Ms Modesto, the property of the husband and the wife is insufficient to satisfy her claim.
In circumstances where:
(a)on the relief presently sought by the wife in her amended Initiating Application, insofar as it relates to Ms Modesto, it cannot be said that her rights may be directly affected by an issue in the proceeding, in that, even if the wife were successful, she does not seek any relief in relation to the husband’s alleged interest in Ms Modesto’s shareholding in J Pty Ltd; and
(b)accordingly, in the circumstances, it cannot be said that her participation as a party is necessary for the Court to determine all issues in dispute in the proceeding –
the joinder application, insofar as it relates to Ms Modesto, must also be, and accordingly will be, dismissed. In any event, by the joinder application, procedural fairness in respect of the wife’s s 78 of the Act claim has been accorded to Ms Modesto and, by her opposition thereto, she has nevertheless declined to participate in the proceedings and, in the result, presently successfully so.
However, that is not to say that the concerns raised by the wife in relation to the financial transactions between the husband and Ms Modesto may be without merit. Indeed, those concerns are fortified by the husband’s (and Ms Modesto’s) admitted non-disclosure in respect of, at least, the disposition by him to her of $2.2 million of the $2.3 million life insurance payment received by him, which clearly constituted “property of the parties to the marriage or either of them” within the meaning of, and for the purposes of, s 79(1) of the Act.
CONCLUSION
Accordingly, the dismissal of the wife’s present joinder application against Ms Modesto and J Pty Ltd is entirely without prejudice to any further joinder application she may be advised to make, provided that, unlike the present joinder application, it satisfies the requirements of r 3.01 of the Rules.
Insofar as the balance of the wife’s amended Application in a Proceeding filed 29 February 2024 is concerned, together with the husband’s amended Response thereto filed 22 March 2024, given the limited time available at the hearing on 28 March 2024, the other relief sought therein was unable to be addressed. The amended Application and the Response will be adjourned for hearing and determination by a Senior Judicial Registrar on a date to be fixed.
I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Strum. Associate:
Dated: 17 June 2024
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