Kelly and Lomax & Anor

[2013] FamCA 496

FAMILY COURT OF AUSTRALIA

KELLY & LOMAX AND ANOR [2013] FamCA 496

FAMILY LAW – INTERIM PROPERTY ORDERS – Re-opening – Principles – Exercise of Discretion.

FAMILY LAW – PROCEDURAL ORDERS – Joinder application – Compliance with Family Law Rule 6.03.

FAMILY LAW – PROCEDURAL ORDERS – Disjoinder application – Test to invoke courts jurisdiction under rule 6.04 – Identification of cause of action.

Family Law Act 1975 (Cth)
Family Law Rules 2004 – Rules 1.12, 6.03, 6.03(2), 6.03(3), 6.04.
Federal Magistrates Court Rules 2001 – Rule 11.02(2).

Abdo and Abdo (1989) FLC 92-013
Summitt & Summitt (Re-opening) [2009] FamCA 365
Storrer & Storrer & Ors [2012] FamCA 448
B Pty Ltd & ors & K & Anor [2008] FamCAFC 113
Pelerman (2000) FLC 93-037
Barnes v Addy (1874) LR 9Ch App 244
Ascot Investments Pty Ltd v Harper (1980-1981) 148 CLR 337
Southwell & Jane [2011] FamCA 663

APPLICANT: Ms Kelly

RESPONDENT: Mr Lomax

SECOND RESPONDENT: Ms Lomax

FILE NUMBER: BRC 6009 of 2010

DATE DELIVERED: 27 June 2013

PLACE DELIVERED: Townsville

PLACE HEARD: Brisbane

JUDGMENT OF: Tree J

HEARING DATE: 11, 12 and 13 March 2013; 29 April 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: P J Baston

COUNSEL FOR THE FIRST

 RESPONDENT:

T Kirk SC
(on 11, 12 and 13 March 2013)

SOLICITOR FOR THE FIRST 

RESPONDENT

Cooper Grace Ward

FIRST RESPONDENT

In Person on 29 April 2013

COUNSEL FOR THE SECOND

RESPONDENT

T Kirk SC
(on 11, 12 and 13 March 2013)

SOLICITOR FOR THE SECOND

RESPONDENT

Cooper Grace Ward

SECOND RESPONDENT: In Person on 29 April 2013

Orders

1. That the applicant have leave to re-open her case in support of her Third Amended Application in a Case file 4 March 2013, and in opposing the husband’s interim orders sought in his Amended Response to Initiating Application filed 13 November 2012 by, in proper form, putting into evidence materials derived from subpoenae issued to the National Australia Bank.

2. That pursuant to Family Law Rule 6.04, the second respondent Ms Lomax be removed as a party to this proceeding.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Kelly & Lomax and Anor 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 TOWNSVILLE

FILE NUMBER: BRC 6009/2010

Ms Kelly

Applicant

And

Mr Lomax

First Respondent

And

Ms Lomax

Second Respondent

REASONS FOR JUDGMENT

INTRODUCTION 

1. On 13 March 2013, I reserved my decision in relation to a number of interim applications that were heard by me on 11, 12 and 13 March 2013.

2. By Application in a Case filed 18 April 2013, the applicant wife sought the following orders: –

   1.That the hearing of the various applications heard by Hon Justice Tree on 11, 12 and 13 March 2013 be reopened and the wife be given leave to tender into evidence and rely upon those documents produced under subpoena from the National Australia Bank Ltd on 11 and 13 March 2013.

   2.That within seven days the wife file and serve any further submissions that she wishes to rely upon based on those documents produced under subpoena from the National Australia Bank Ltd on 11 and 13 March 2013.

   3.That within 10 days the husband file and serve any further submissions that he wishes to rely upon based on those documents produced under subpoena from the National Australia Bank Ltd on 11 and 13 March 2013.

   4.That within 14 days the wife file and serve any further submissions in reply that she wishes to rely upon based on those documents produced under subpoena from the National Australia Bank Ltd on 11 and 13 March 2013.     

3. Those orders were opposed by the respondents, and the application to re-open was heard by me on 29 April.

THE MARCH PROCEEDINGS

1. In the hearing before me on 11, 12 and 13 March 2013 there were a number of competing applications.  The first was an application by the wife that the husband’s now wife, Ms Lomax, a proposed second respondent, be added as a party to these proceedings.[1]  Next there was the wife’s application for spouse maintenance in the sum of $3,000.00 per month.[2]  The third application made by the wife was that the respondent pay into a solicitor’s trust account $200,000.00 towards her legal costs, or alternatively an amount equivalent to those expended by the respondent husband and/or Ms Lomax from 18 December 2012.[3]  The fourth application made by the wife was for the appointment of valuers in respect of certain properties and corporations, with the respondent husband being responsible for all costs and expenses associated with the preparation of the valuations.

   [1] This application was made by para.2 of Part B to the wife’s Reply filed 17 September 2012.

   [2] This application was made by para.2 of the wife’s Third Amended Application in a Case filed 4 March 2013, as amended in the course of submissions by counsel for the wife.

   [3] This application was made by para.7 of the wife’s Third Amended Application in a Case filed 4 march 2013.

2. There were then two applications by the husband.  The first was an order that the former matrimonial home at B Street, Suburb C (“B Street”) be sold, and from the proceeds of sale the National Australia Bank mortgage secured against the property be discharged, with the remaining funds being placed in a trust account pending final orders.  In the alternative the husband sought an order that the wife vacate the property and that it be rented out, with the rental income being used to pay expenses associated with the property, and any surplus being held in trust until trial.[4]

   [4] These were in paras.2 to 8 of the interim orders sought by way of Amended Response to Initiating Application filed 13 November 2012.

3. Finally Ms Lomax sought orders, in the event that she were joined to the proceedings, comprising summary dismissal of any claim for relief against her, and in the alternative, that security for her costs be provided by the wife.

4. It will be appreciated that each of those applications raise different issues. However relevant to the wife’s applications for spouse maintenance, interim property settlement of a sum for legal costs and the appointment of valuers, and the husbands application for sale of B Street, was the husband’s current financial situation. He denied that he was able to fund spouse maintenance, the wife’s legal costs and the likely cost of valuers, and in large part asserted that B Street ought be sold because of his inability to continue to service the mortgage over it.

5. A related matter was the extent to which the ninth respondent, D Pty Ltd, a company of which Ms Lomax is the sole director and shareholder, had assumed the conduct of the business previously conducted by the tenth respondent, K Pty Ltd, being a company of which the husband was (but is no longer) a director and shareholder. The wife’s case was that in reality the device of operating that business under the auspices of D Pty Ltd was an attempt by the husband to falsely represent that he no longer exercised control over that company and the business, with a view to, in effect, removing that business and the cash flows derived from it from the grasp of the wife’s application seeking a division of matrimonial property. The wife asserted that in reality, the income derived from that business was derived by the husband, and that in assessing his current financial circumstances, it would be erroneous to exclude from consideration both the assets and income of D Pty Ltd.

THE NEW MATERIAL

1. The new material was put before me in a less than satisfactory way. Firstly, some advertence to it was made in an affidavit sworn by the wife filed 18 April 2013. At that time, the wife does not appear to have had the benefit of legal assistance. Far more extensive reference to the new material was contained in the written submissions of Mr Basten who, at the hearing of the application to re-open, appeared for the wife. Although as I have indicated, it is unsatisfactory to have material adverted to only in written submissions, but not otherwise contained in the affidavit material, given that both the affidavit and the written submissions only purported to recite aspects of documents that had been produced by the National Australia Bank pursuant to subpoena, it seems sensible if I consider the totality of the references to the material, as to do otherwise would only further serve to dislocate the hearing of this application. In fairness, I do not overlook that the relevant documents were the subject of a Notice to Admit Facts and Documents filed by the wife on 12 April 2013, but that notice was met with a blanket denial by the husband.

2. It is said by the wife that the new material is capable of supporting an inference that, contrary to his assertions, the husband does have financial capacity sufficient to meet the likely imposts upon him which would flow from the wife’s applications being successful, and further, that the husband has effective control over D Pty Ltd and treats both it and its cash flows as his own. It is therefore said that on the basis of this material, a court could conclude that the husband continues to have the financial capacity to service the mortgage over B Street, and hence its sale as sought by the husband’s interim application is not required.

3. It appears as though the most potentially relevant documents are those in the new material generated earlier this year, commencing with a File Summary Report and Question Set of 21 January 2013. Ultimately, on 6 March 2013 the National Australia Bank approved, subject to yearly review, continued borrowings of slightly in excess of $7 million in relation to the husband and related entities. Within this portfolio of borrowings is said to be included $585,000 being the mortgage in respect of B Street. Particularly, it is said that on 1 March 2013 Mr E, a relevant National Australia Bank account manager, made the following entries in relation to the review of the loan facility: –

   -[Mr Lomax] advised he would not continue to service the consumer lending that related to the property conducted by his ex-wife [Ms Kelly].

   -      [Mr Lomax] refused to provide all requested information we thought necessary to complete the annual review of the facilities – the information requested was financial statements for all borrowing entities on the file.

   -      [Mr Lomax] advised he had appointed legal counsel to assist with negotiation with NAB.

   -      It has been well documented over many years, that this customer is reluctant to provide the financial information requested by NAB to fully assess the group’s capacity for debt servicing. Due to ongoing court action with [Mr Lomax’s] ex-wife, [Mr Lomax] does not want to provide us with any information he deems NAB may have to provide to the courts in relation to the matter with his ex-wife [Ms Kelly].

   …

4. As I have already indicated, a substantial issue raised in the March hearing was the extent to which the business conducted by D Pty Ltd was a continuation of the business previously conducted by companies under the control of the husband. A proper understanding of the corporate structures and restructures relevant to the allegation is not easy to obtain, largely because there have been several iterations of the relevant corporate structures and company names. From the husband’s affidavit filed 13 November 2012 at paragraphs 111 to 154 the following appears to be the case.

5. Firstly, it appears that F Pty Ltd started trading in January 2000. Its business was to provide consultancy services. From 2000 until November 2004, 40 per cent of the shares in F Pty Ltd were held by another company, G Pty Ltd, of which latter company a trust associated with the husband and the wife held 70 per cent of the shares.

6. Secondly, by agreement dated 3 August 2004, the husband in his capacity as trustee of a trust acquired a further 28 A class shares in F Pty Ltd, which saw interests controlled by him hold 56 per cent of the shares in that company. The business continued to trade until 2007. Although it is not clear, it appears as though the reason for the company ceasing to trade related to a dispute which the company had with the Australian Taxation Office. It is possible that the reason it ceased to trade was to ensure that, in the event that the dispute with the Australian Taxation Office was not resolved in the company’s favour, any liability which the company had to it would remain unsatisfied.

7. Thirdly, on or about 22 January 2007, another company called H Pty Ltd commenced to operate the consultancy business which had previously been operated by F Pty Ltd. In fact, H Pty Ltd was the new name of G Pty Ltd, the company which originally held 40 per cent of the shares of F Pty Ltd. It appears as though at that time H Pty Ltd was a company associated with the husband and another person, Mr A. In conjunction with H Pty Ltd commencing to operate as a consultant, it changed its name to L Pty Ltd.

8. Fourthly, on 16 October 2010 the board of L Pty Ltd resolved to cease providing consulting services by the company. Each of the then directors resigned and on 16 October 2010 Ms Lomax became the sole director and company secretary of L Pty Ltd. On 4 February 2011, she caused the name of L Pty Ltd to be changed to K Pty Ltd.

9. At paragraphs 126 and 127 of the husband’s affidavit filed 13 November 2012, he offered an explanation of why the decision for L Pty Ltd to cease providing consulting services was made. However I note that at paragraph 100(b) of the same affidavit he disclosed that at the end of 2010 the company had a debt of over $6 million owing to a company  in Country J. In fact, Annexure 20 to the husband’s affidavit filed 25 May 2012 demonstrates that in August 2010 the Supreme Court of Victoria entered judgment against L Pty Ltd for $5,903,098.20. That judgment was based upon a final award of the Country J Arbitration Centre dated 15 September 2009. It would be open to infer that at least a component of the decision to cease providing consultancy services was to ensure that income streams associated with that business could not be attached in execution of the judgment of the Supreme Court of Victoria. Such an inference would be supported by paragraph 180 of the husband’s affidavit filed 25 May 2012 in which he identified that the “demise of [L] Pty Ltd [was] by virtue of the [Country J] legal case.”

10. Fifthly, on a date which is not altogether clear on the evidence, D Pty Ltd commenced to offer consulting services. It appears as though that company was incorporated on 12 March 2010. As at that date, its registered office was “[L] Pty Ltd Level [P] [Building Q]  Brisbane 4000.” It is not clear what its original name at the time of incorporation was, but it appears from the relevant ASIC search result at annexure D to the affidavit of Ms Lomax filed 12 October 2012 that on 31 August 2010 it started using the name D Pty Limited. Likewise the material does not enable me to discern who its officers were as at incorporation, but it appears as though on 1 October 2010, Ms Lomax was appointed both sole director and secretary of the company.

11. In his affidavit filed 25 May 2012, at paragraphs 171 to 184, the husband said as follows:-

    171.[Ms Kelly] on a number of occasions asked about a company of which my current wife controls 56% of the shareholding through a trust.

    172.[D] Pty Ltd is a private company that is neither owned or controlled by me nor [Ms Kelly]. It was established some six years after separation and prior to [Ms Kelly] initiating an application for financial settlement.

    173.    [D] Pty Ltd is owned by four shareholders.

    174.Now shown and marked exhibit “SCL – 28” is a copy of the company documents.

    175.My role is as a consultant to the company for technical work and also in the capacity of CEO.

    176.At the time of incorporation, the intention of the company was to grow as a logistics and people management company supporting the … industry and carrying out non-consulting related business.

    177.The shareholders of [D Pty Ltd] anticipated that the income and profit from that company would be derived from the [provision of transport] and the provision of [employees] for [sites] around the world, with the goal of ultimately owning and operating [sites].

    178.These activities were not part of the core business of [L] Pty Limited.

    179.[Ms Lomax] has been managing the logistics of various companies (including [L] Pty Ltd) for almost a decade. This included managing [transport] operations and numerous staff members. This experience places her in a good position to be the director of [D] Pty Limited.

    180.The business of [D Pty Ltd] morphed into a broader business largely as a result of the demise of [L] Pty Ltd by virtue of the [Country J] legal case.

    181.In the management accounts vetted by me for the financial year 2010 – 2011 [D] Pty Ltd made a small operating loss.

    182.While there are no plans for me to acquire a shareholding in [D] Pty Ltd – it is reasonable to expect that I will potentially receive direct benefits from [D] Pty Ltd by virtue of the services contract between [D Pty Ltd] and [I] Pty Ltd.

    183.In addition to the direct benefit to me, I’m likely to receive direct benefits from the company if it becomes profitable as a result of dividends my current spouse would receive from the company.

    184.With no trading history of the company and the fact that the core business focuses on new industry sector, the extent of these indirect benefits cannot be estimated at present.

12. These matters were explored in the cross examination of the husband. Ultimately an analysis of his evidence suggests that at about the same time as L Pty Ltd resolved to restrict the scope of its business operations so as to exclude consultancy, D Pty Ltd commenced to offer those services. It appears that it did so from the same office as L Pty Ltd had previously offered those services, using the same equipment and databases, and to the same clients as L Pty Ltd had previously provided its services.

13. On one view, it might be the case that there was a transmission of business between L Pty Ltd and D Pty Ltd, just as there previously appears to have been some sort of transmission of the consultancy business between F Pty Ltd and L Pty Ltd in 2007. On one view, the 2007 transfer may have been to defeat any attempted execution by the Australian Taxation Office against the income stream from the consultancy business. A similar view might be taken in relation to the 2010 events, in that it could be argued that they were intended to defeat any attempted execution by the Country J company upon the Victorian Supreme Court judgment. The argument would no doubt continue that the arrangements in both instances were essentially shams, intended to provide an appearance of legal divestment of the businesses, whereas in fact the operations of the business were unchanged, the persons involved remained the same, the clients remained the same, and the effective control of the business remained the same.

14. Against that background the material which has been produced on subpoena by the National Australia Bank could potentially be relevant. Amongst other interpretations, it could support the suggestion that the income stream generated by D Pty Ltd is used to service debt associated with all of the corporate and other entities associated with the husband and Ms Lomax in a way virtually unchanged from how that income stream was used to service those debts when it was being derived by L Pty Ltd. Whether or not it has that character is a matter that will ultimately need to be determined.

15. However if it were to be found to have such a character, then it may support either an inference that the business conducted by D Pty Ltd is property of the husband, and that its earnings ought be treated as income of the husband, or alternatively that it represents a financial resource available to him relevant for consideration under section 75(2).

RE-OPENING

1. The question of whether or not to admit further evidence is necessarily one of discretion. Whilst there has been considerable discussion as to the relevant principles governing the admission of further evidence in appeals in the Full Court of this court (see for example Abdo and Abdo (1989) FLC 92-013) I was not referred to any case which specifically dealt with the principles relevant to reopening the evidence in reserved interim property proceedings. Some assistance can be derived from the authorities dealing with the re-opening of evidence in reserved trials. Those cases have been helpfully reviewed by Murphy J in Summitt & Summitt (Re-opening) [2009] FamCA 365 in the following terms:-

   “What are the Applicable Principles?

   14.In a case involving an application for settlement of property, it can broadly be said that common law principles govern applications to re-open in this Court. (see eg Gelley & Gelley (1992) FLC 92-290 and the cases there discussed).

   15.Those principles make it clear that the granting of leave to re-open is discretionary.  That discretion is guided by the interests of justice.  The essential question is, is the court more able to do justice in the facts and circumstances of the particular case if the application is granted.  (see eg Smith v NSW Bar Association (1992) 176 CLR 256; Urban Transport Authority v NSEISER (1992) 28 NSWLR 471 at 478 and EBv CT (No. 2) [2008] QSC 306)

   16.In cases where reasons for judgment have not been delivered, the High Court has held that the primary consideration should be embarrassment or prejudice to the other side.  (see Smith above, at 266-267)

   17.A recent decision of the Supreme Court of Queensland, EBv CT (No. 2) [2008] QSC 306 was referred to by both counsel for the husband and wife. That case involved an application for property settlement under (then applicable) State law with respect to a de facto relationship. In that case, Applegarth J summarised, by reference to earlier authorities, the (common law) principles applicable to a re-opening:

   [2] The guiding principle in deciding whether to grant leave to re-open is whether or not the interests of justice are better served by allowing or rejecting the application.  Reference is made in Finbrough Investments Pty Ltd v Airlie Beach Pty Ltd and in the cases referred to in it to the need for finality and litigation.

   [3] In Smith v New South Wales Bar Association the High Court stated that different considerations may apply depending on whether the case is simply one in which the hearing is complete, or one in which reasons for judgment had been delivered.  As to the former situation, the Court said it was difficult to see why the primary consideration should not be that of embarrassment or prejudice to the other side.

   [4] In Reid v Brett the criteria governing the exercise of the discretionary power to re-open a case to admit further evidence where the hearing has concluded but judgment has not been delivered, was said to be as follows:

   The further evidence is so material that the interests of justice require its admission;

   (b)         the further evidence, if accepted, would most probably effect the result of the case;

   (c)         the further evidence could not by reasonable diligence have been discovered earlier;

   (d)         no prejudice would ensue to the other party by reason of the late admission of the further evidence.

   [footnotes and references omitted]

   18.In addition, his Honour held  that:

   [5] Reference by the High Court to prejudice to the other party, and the guiding principle of the interests of justice, require account to be taken of the strain that litigation imposes on personal litigant.  The prejudice caused by delay in the delivery of an expected judgment at the end of stressful litigation can not always be measured in terms of money or cured by an order for costs.  The interests of justice is served by finality in litigation, particularly where prolonged litigation imposes a strain on personal litigants.

   19.I consider that that is particularly true of litigation in this court generally, and in this case specifically.  I will return to this issue below.

2. In my view, the factors adverted to in that passage are factors relevant to re-opening the evidence in interim proceedings, although it needs to be borne in mind that the finality which attends a trial judgment is not normally a feature of an interim judgement. The exercise of the discretion must be according to the interests of justice. Relevant considerations here are: –

   ·    that the new material is potentially relevant to matters directly in issue in the proceedings before me;

   ·    that the new material did not reasonably become available to the wife until after the conclusion of the interim hearing on 13 March 2013;

   ·    that in any event the resolution of the interim hearing would not finally conclude the rights of the parties, in the sense that they would not merge in the judgment

   ·    if I were to deny the application to admit further evidence, there would be nothing to preclude the wife from renewing her application, supported by affidavit material including that which was obtained on subpoena from the National Australia Bank.

3. In my view, the weighing of those considerations tells in favour of acceding to the application to admit further evidence. However it is not the case that such evidence stands to impact upon all of the disputed applications before me. It seems appropriate that I should proceed to now determine those applications which do not stand to be impacted upon by any fresh material. As I previously indicated, the fresh material only potentially impacts upon findings as to the assets, income and financial resources of the husband, and thus those components of the applications which do not involve those issues should be dealt with now. I identify those as being the application to join Ms Lomax as a party, and Ms Lomax’s application to be removed as a party. I will therefore proceed to determine them.

THE JOINDER APPLICATION

1. On 22 June 2012, Federal Magistrate Myers made an order transferring this matter from the Federal Magistrates Court into this court.             

2. At the time there was then before the court an extant and unresolved application by the wife for leave to join Ms Lomax as a second respondent.  Leave was required by virtue of Federal Magistrates Court Rule 11.02(2).  It follows that as at the date of transfer, Ms Lomax was not a party.

3. The Federal Magistrates Court Rules were dissimilar to the rules of this court dealing with addition of parties. In this court, under Family Law Rules rule 6.03 leave to join a party is not required, if there is compliance with rules 6.03(2) and (3). The wife contends that she complied with the rule 6.03 procedure because after transfer, on 8 August 2012 she filed a Third Amended Initiating Application which purported to name Ms Lomax as a second respondent, and her affidavit filed on that day set out sufficient facts for joinder so as to comply with rule 6.03(3)(a).

4. Mr Kirk SC, who appeared for the husband and Ms Lomax, directed my attention to rule 6.03(2) and specifically that the addition of another party is by “amending” the application or response to add the name of the parties. In that regard he directed my attention to the Third Further Amended Initiating Application filed by the wife on 9 August 2012 which named Ms Lomax as the second respondent, together with a further sixteen previously unnamed respondents, but omitted to underline her name, although it did have all of the other new respondents’ names underlined.

5. The history of the application is a little tortured.  Whilst the matter was still in the Federal Magistrates Court, by Application in a Case filed 1 June 2012, orders were sought that Ms Lomax be joined as a party.  That was carried forward into an Amended Application in a Case filed 21 June 2012.  In the meantime however, on 15 June 2012 a Further Amended Initiating Application had been filed, which named Ms Lomax as a second respondent, and underlined her name.  Then, as if the matter were not already sufficiently complex, on 18 June 2012 a Second Further Amended Initiating Application was filed in the Federal Magistrates Court Registry which continued to name Ms Lomax as a second respondent, but did not have her name underlined.

6. Therefore the situation was that the proceedings transferred by the Federal Magistrates Court contained an internal contradiction: on the one hand the Second Further Amended Application (which was the extant originating process at the time of transfer) named Ms Lomax as a second respondent; on the other hand amongst the outstanding interlocutory applications then on the file was an Amended Application in a Case which sought, by order 2, that Ms Lomax be joined as a party to the proceedings. Although in the notations to the orders of Federal Magistrate Myers made 22 June 2012 it was stated “it is the court’s view that the joinder of [Ms Lomax] ought be determined at the first available opportunity” that appeared to be made without advertence to rule 6.03 of the Family Law Rules.

7. Upon balance, I think that the filing in the Family Court Registry of the Third Further Amended Initiating Application on 9 August 2012, which named Ms Lomax as a second respondent, is sufficient compliance with rule 6.03(2). On the same day, there was filed an affidavit of the wife which under the heading “[A]dding [Ms Lomax] as a party” had twenty two paragraphs of material which seems to comply with rule 6.03(3)(a).

8. If I am wrong as to that, then of my own initiative I would exercise the power to dispense with the rules which this court has pursuant to rule 1.12.  In so concluding I rely upon the following matters:-

   ·The purpose of the rules relating to the joinder of parties, at least in this court, is intended to ensure that, subject to the right to seek disjoinder, the appropriate parties as determined by the applicant are before the court;

   ·There is a cogent explanation for why in the Third Further Amended Initiating Application, Ms Lomax’s name was not underlined, namely that it had been first underlined in (a seemingly misguided) Further Amended Application filed 15 June 2012, and remained stated as a second respondent (albeit not underlined) in a Second Further Amended Application filed 18 June 2012;

   ·It appears as though the non-compliance with Rule 6.03 was not intentional;

   ·Dispensing with the compliance with the rules would not impact upon Ms Lomax’s right to bring an application under Rule 6.04 to have her removed as a party, and indeed, in the alternative to her opposition to joinder, that is precisely what she has done.

REMOVAL OF MS LOMAX AS A PARTY

1. That then brings me to that application for disjoinder.  Few authorities appear to exist in relation to the test which a party would need to satisfy in order to invoke the courts jurisdiction under Rule 6.04.  In Storrer & Storrer & Ors [2012] FamCA 448 O’Reilly J had cause to consider the rule because, in the unique circumstances of that case, she regarded the relevant party’s joinder “as complete, as if permission had been granted already, in order to advance the matter.” Whilst her Honour did not expressly say so, it appears as though her Honour regarded the test under rule 6.04 as, in a sense, being the inverse of the test which applies to rule 6.03, so that a party ought be disjoined if, upon an application for joinder, they would not be joined. That appeared to be the position adopted before me by both counsel, and it seems logical.

2. As to the test which a party would need to satisfy in order to achieve joinder of a party, in B Pty Ltd & ors & K & Anor [2008] FamCAFC 113, the Full Court appeared to approve that an application for joinder was analogous to an application for summary dismissal for the proposed claim. At [52] the court said:-

   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.

3. In Pelerman (2000) FLC 93-037 at 46 the Full Court said in relation to the test for summary dismissal as follows:-

   The gravaman of the appeal is that the trial Judge erred in the exercise of the discretionary power to summarily dismiss the application.  It is well established that the following principles apply as were recently reviewed and stated in Bigg v Suzi:-

   (a)The power for summary relief is a discretionary one.

   (b)Relief “is rarely and sparingly provided.”

   (c)The parties seeking summary dismissal must show that the application is “doomed to fail” or as has been otherwise described that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious.

   (d)A weak or one that is unlikely to succeed is not sufficient to warrant termination.

   (e)If there is a serious legal question to be determined, it should ordinarily be determined at a trial.

   (f)If notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a court would ordinarily allow that party reframe its pleadings.

4. With that in mind it is necessary to consider the basis of the case asserted by the applicant wife against Ms Lomax.

5. In the Third Further Amended Application the relief sought against Ms Lomax comprises:-

   (a)a declaration that second respondent holds one hundred shares in the third respondent on trust for either the wife or the wife and husband jointly;

   (b)orders requiring Ms Lomax to transfer her shares in the third respondent, resign as a director of it, and appoint the wife as the sole director and secretary, remove any person who is a signatory or authorised representative of the third respondent with any bank or financial institution, and deliver up to the wife all of its books of account and records;

   (c)orders requiring Ms Lomax to remove the husband as sole director and secretary of the fourth respondent, to appoint the wife as sole director and secretary, to remove any person as a signatory or authorised representative of the fourth respondent and to deliver up the fourth respondent’s books of account to the wife;

   (d)orders requiring Ms Lomax to resign as sole director of the ninth respondent, to appoint the wife as the sole director and secretary of it, to remove any person who is a signatory or authorised representative of the ninth respondent with any bank or financial institution, and to deliver up to the wife all of the books of account and records of the ninth respondent.

   (e)a declaration that the husband and Ms Lomax hold the title to their matrimonial home at M Street, Suburb N (“M Street”) on trust for either the wife, or the wife and husband jointly.

6. Essentially the claims against Ms Lomax that relate to the third respondent, the fourth respondent and the ninth respondent, seek to divest her of ownership of shares in, and/or control of, those entities.  In the course of argument, I pressed counsel for the wife to identify the cause of action under which such relief was claimed.  At one stage he accepted that the claim was a tracing claim against property which was property of the husband, the wife or both, however a right to trace in equity is a remedy, not a cause of action.

7. Then he said that the claim against Ms Lomax was pursuant to the principles established in Barnes v Addy (1874) LR 9Ch App 244, as having knowingly assisted the husband in the breach of his fiduciary duty arising from his directorship of L Pty Ltd. It was said that the duty was the duty to act in the best interests of the company, which he breached by transferring the consultancy business of that company to D Pty Ltd.

8. As I have previously indicated in these reasons, the evidence of the husband was that at separation there existed, amongst others, a consultancy business conducted at Level P of Building Q, Brisbane.  As at 2007, that business was operated by L Pty Ltd.  It thereafter ceased operating that business in 2010.  He denied that that business was transferred to anyone, but conceded that sometime thereafter (precisely when was unclear) D Pty Ltd commenced to operate a not completely dissimilar consultancy operation from the same address.  Therefore on the one hand the wife asserts that the husband and Ms Lomax have colluded to transfer the consultancy business from an entity controlled by the husband, to an entity ultimately owned and controlled by Ms Lomax; on the other hand, the husband and Ms Lomax say that the present consultancy business is a new business, not the product of any transfer from L Pty Ltd.

9. Leaving aside M Street, the only property of Ms Lomax which the wife seeks to be wrested from her are the 100 shares which she holds in I Pty Ltd, the third respondent.  That company was incorporated in March 2008, which was post separation.  According to a schematic diagram prepared by Ms Lomax and annexed to her affidavit of 12 October 2012, that company is the trustee of the O Trust, which in turn owns 560 (of 1000) shares in D Pty Ltd.  That company presently conducts the consultancy business.

10. Even if the wife’s case is correct, and the consultancy business was wrongfully transferred by L Pty Ltd to D Pty Ltd, I cannot identify any legal or equitable claim which the wife might have against the shares which Ms Lomax holds in I Pty Ltd or the shares which it holds in D Pty Ltd.  Any remedy which the wife may have for breach of the husband’s director’s duties would not lead to an entitlement to the shares in either the new legal owner of the property improperly transferred away, or its ultimate holding company. 

11. At one point, counsel for the wife sought to rely upon Ascot Investments Pty Ltd v Harper[5] on the basis that Ms Lomax was joined for ancillary relief to ensure the corporation against whom the order was made, of which she is a shareholder, performed its obligations.  I cannot see that that case assists that basis for joining Ms Lomax.  In Southwell & Jane [2011] FamCA 663 Cronin J rejected that joinder solely for enforcement purposes would satisfy the test for joinder.[6]

    [5] (1980-1981) 148 CLR 337.

    [6] His Honour was considering joinder in the context of FLR 6.02 (1).

12. If there has been receipt by D Pty Ltd of an asset transferred in breach of a director’s fiduciary or statutory duties, and it was on sufficient notice of the facts from which that breach of duty arises, then it may be possible for the asset to be traced into its hands.  That is the primary remedy; the legal or equitable remedy is not directed towards the shareholding of the transferee or the ultimate holding company of the transferee. Such a claim will inevitably fail.

13. There is then the claim against Ms Lomax relating to the fourth respondent.  These orders are restricted solely to replacement of directors, access to funds and possession of the company’s books of accounts.  This was not addressed in submissions before me.  I can identify no cause of action against Ms Lomax which could possibly found such relief.

14. That then only leaves the claim arising out of Ms Lomax’s joint ownership of M Street.  In that regard that property was acquired on Saturday 30 October 2004.  There is a dispute between the parties as to whether or not separation had occurred by then.  The wife says separation was on 2 December of that year; the husband says that separation had occurred in March.

15. At para.51 of her affidavit filed 10 March 2013, the wife says as follows:-

    On 30 October 2004, the respondent purchased [M] Street at auction for $1,375,000.00.  The respondent called me on the afternoon of 30 October 2004 to tell me he had purchased a house at auction.  He had not discussed this with me prior to this.  During the phone call I voiced my concerns, the respondent replied by saying that it was an investment property.  We spoke about this purchase over the next few days and the respondent assured me that we could use this property to live in while renovating the [B] Street property.

1. Not long thereafter, the husband admitted to the wife that he was having an affair with Ms Lomax, who was then his personal assistant. 

2. In his affidavit filed 7 March 2013 the husband said:-

   6. On Saturday 30 October 2004, about seven months after the applicant wife and I separated, my now wife ([Ms Lomax]) purchased the [M] Street property in my name at auction for $1,375,000.00.  I did not attend the auction.

   7. On that same day, a 10% deposit of $137,500.00 for the property purchase was provided to the sellers by way of a cheque drawn from [I] Pty Ltd.  The funds were paid to me by [I] Pty Ltd for outstanding loans owed to me by the company.

   8. On 25 November 2004, a new mortgage of $1.5 million was secured against the [M] Street property in my name and [Ms Lomax’s] name.  Of this:-

   (a)$1,237,412.00 was utilised to pay the balance of funds to the seller for the purchase of the [M] Street property; and

   (b)$253,385.00 was paid directly in to the [B] Street National Australia Bank Equity Facility number …003.

3. Counsel for the wife asserted that therefore B Street was either purchased during the course of the marriage, and/or with joint and/or matrimonial funds.

4. He further says that subsequently the husband transferred a 50 per cent interest in B Street to Ms Lomax for no valuable consideration.

5. On the other hand, Mr Kirk SC said that there could be no legitimate claim against Ms Lomax’s interest in M Street because she was a joint borrower of the $1.5 million secured against it, from which borrowings an amount in excess of $250,000.00 was paid back into an account linked with the B Street mortgage to the NAB.

6. At para.36 of the husband’s affidavit filed 13 November 2012, he deposed to M Street’s value as being $2,200,000.00, although it has secured against it a $2,800,000.00 debt (which is also secured over the husband’s parents’ home).  On this basis Mr Kirk SC says that in any event, there is no equity in M Street. 

7. Further, in his affidavit filed 7 March 2013, the husband said the following in relation to Ms Lomax’s contributions to M Street:-

   14.[Ms Lomax] contributed approximately $100,000.00 towards the initial purchase of the house and goods for the house.  These funds came from the sale proceeds of [Ms Lomax’s] previous house at [R Street] in [Suburb S].

   …

   16.Since we obtained the mortgage for the [M] Street property on 24 November 2004, by way of contribution [Ms Lomax] has been responsible for the debt relating to the mortgage between 2004 and 2013, being approximately $2.8 million; although the figure varies (for the total facility).

   17.[Ms Lomax] has contributed to 100% of the interest payments for the [M] Street mortgage from 2012 to 2013, being in an amount of approximately $196,000.00.  Clearly I deny that [Ms Lomax] holds her interest on trust for me.

8. It is difficult in the extreme to envisage any circumstance in which the wife could succeed in an action against Ms Lomax in divesting her of all, or part, of her proprietary interest in M Street.  She contributed in excess of 50 per cent of the purchase price of the property, and indeed from those borrowings, funds were directed to the reduction of indebtedness of the husband and the wife in the sum of $253,385.00, of which, assuming she was the equal borrower of that sum, $126,692.50 was money paid by her.  Given that, it cannot seriously be said that she took a 50 per cent interest in the property as a volunteer, or that she acted improperly.  It is not suggested that the husband improperly obtained the funds for the deposit.  There is simply no reasonable cause of action against Ms Lomax relating to her interest in M Street, and hence no reasonable basis for keeping her in these proceedings.  She will be removed as a party.

CONCLUSION

1. I will hear the parties as to the timetable for the proper placing before me of the new material and any responsive evidence, and the making of submissions upon it.

I certify that the preceding 58 paragraphs are a true copy of the reasons for judgment of the Honourable Justice Tree delivered on 27 June 2013.

Associate: 

Date:  27 June 2013