Malinda and Malinda and Ors

[2011] FamCA 322

FAMILY COURT OF AUSTRALIA

Malinda & Malinda and Ors [2011] FamCA 322

FAMILY LAW – PRACTICE AND PROCEDURE - joinder

Family Law Act 1975 (Cth)

B Pty Ltd and Ors and K and Anor [2008] FamCAFC 113; (2008) FLC 93-380
Gould and Gould; Swire Investments Ltd (1993) FLC 92-434

APPLICANT: Ms Malinda

RESPONDENT: Mr Malinda

2^ND RESPONDENT: The Malinda Family Settlement

3^RD RESPONDENT: Business 1

4^TH RESPONDENT: G Malinda

5^TH RESPONDENT: P Malinda

6^TH RESPONDENT: A Malinda

FILE NUMBER: MLC 12965 of 2007

DATE DELIVERED: 10 May 2011

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 29 April 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr North SC with Mr Wood

SOLICITOR FOR THE APPLICANT: Caroline Counsel Family Lawyers

COUNSEL FOR THE RESPONDENT: Mr Thompson

SOLICITOR FOR THE RESPONDENT: Saxbys Lawyers Ptd Ltd

SOLICITOR FOR THE 2^ND RESPONDENT: Mr Umbers, Wilsons Lawyers

COUNSEL FOR THE 7^TH, 8^TH, 9^TH AND

10^TH RESPONDENTS:

Mr Moore

SOLICITOR FOR THE 7^TH, 8^TH, 9^TH AND

10^TH RESPONDENTS:

Rush & Failla

Orders

1. That Business 1, G Malinda (also known as L Malinda), P Malinda and A Malinda be joined as parties to these proceedings.

2. That the wife have leave to file a further amended application by 4.00pm on 4 May 2011.

3. That each party by 4.00pm on 5 May 2011 serve upon the solicitors for the new respondents copies of all documents relied upon.

4. That the return of the subpoenae this day be adjourned to 9.30am on 6 May 2011 before the registrar.

5. That all parties have the right to make an application for costs arising out of these proceedings if they so desire. 

6. That the documents referred to in the schedule to the subpoena addressed to the Proper Officer of the Commonwealth Bank of Australia be released for inspection and copying by all parties.

7. That all documents referred to in the schedule to the subpoena addressed to The Principal of Caroline Counsel Family Lawyers be released to all parties for inspection and copying save for the following:

   (a)communications in documents with Mr W that are not relevant may be masked; and

   (b)provided a printed version of the document has been produced, it is not necessary to provide an electronic version of the same document.

8. That all documents referred to in the schedule to the subpoena addressed to Ms Malinda are released for inspection and copying.

IT IS CERTIFIED:

1. That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel, including senior counsel and two counsel to attend.

2. That the reasons for these orders be released as soon as practicable.

AND THE COURT NOTES:

A.The husband’s solicitor agrees to make available to the wife’s solicitor for inspection and copying a copy of any documents evidencing communication between them and Mr W since 1 July 2010 but not any annexures in the same terms as set out in the order above.

IT IS NOTED that publication of this judgment under the pseudonym Malinda & Malinda and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 12965 of 2007

Ms Malinda

Applicant

And

Mr Malinda

Respondent

And

The Malinda Family Settlement
Second Respondent

And

Business 1
Third Respondent

And

G Malinda
Fourth Respondent

And

P Malinda
Fifth Respondent

And

A Malinda
Sixth Respondent

REASONS FOR JUDGMENT

1. The substantive property proceedings between the husband and the wife and the husband’s brother are listed for final hearing before me in July 2011.  These proceedings have been on foot for a number of years. 

2. The proceedings were set down for hearing in September 2010.  They were to be heard in February but as a result of the valuation evidence not being completed, the proceedings had to be adjourned. 

3. On 12 April 2011, the wife filed an application in a case seeking orders that:

   (a)she be granted leave to file an amended application seeking final orders; and

   (b)she be granted leave to join Business 1, G Malinda, P Malinda and A Malinda.

4. The connection between the two proposed orders is that the wife now seeks in her amended application for final orders that the Court set aside transfers of shares said to belong to the husband in the corporate entity referred to above under s 106B of the Family Law Act 1975 (Cth) (“the Act”). The wife’s proposed amended application also seeks to set aside another transaction relating to 50 shares in Business 1.

5. The application to join the parties was opposed by the husband as well as by the persons sought to be joined.

6. Each party relied upon an affidavit.  The wife’s position was that the various transfers occurred after separation and that documents provided by the husband did not adequately explain the transfers.  As Mr North of Senior Counsel for the wife posed, “was something else happening?”

7. The wife pointed to what was described as “deathly silence” by the husband about part of the transaction.

8. Significant discovery was undertaken in this case not to mention a large valuation exercise by a single expert witness who has at this stage, not provided his report.  Despite that discovery, the wife still asserted that there were unanswered questions.

9. Mr Moore of counsel on behalf of the proposed respondents resisted the wife’s application by setting out in considerable detail the evidence of his clients as to how the transactions occurred.  He pointed to various dates and documents saying that there was no basis to suggest that the transaction was a sham.  It was asserted by both the husband and the proposed respondents that an interest in the business was sold at arms-length and value was paid for it.

10. The husband’s position was similar to that of the proposed respondents.  Mr Thompson of counsel appeared for the husband as he had throughout the proceedings.  He said there were two bases to resist the joinder application.  He pointed to the evidence of the husband indicating that documents had been provided including official bank records and copies of loan agreements to show the sale occurred and that money was paid.  He said these proved the transaction complained about by the wife was legitimate.  The one difficulty with that was that the husband’s evidence focussed on the records showing the payments.  It was not suggested by the wife that the payments were not made but rather, the reason they were made was disputed.  One controversial issue was that the wife asserted that in documents examined, the various payments made to the husband had been shown as “sales” by reference to some code that presumably was of relevance to an accountant.  Senior counsel for the wife questioned why if payments were made, why they would be declared as income.  There is no evidence before me that the reference to “sales” is in fact income. 

11. A second ground for resisting the wife’s application was that this joinder had the prospect of prejudicing the commencement date of the trial.  The husband pointed to the impact upon his health of delays and expressed his dissatisfaction with the adjournment in February 2011 when the case was not ready.  He foresaw the prospect of that happening again.  Mr Thompson on behalf of the husband pointed to the various statements by counsel for the wife in September 2010 indicating that the matter would be proceeding.  No reference was made then to any further joinder. 

12. In her current affidavit, the wife referred to the fact that she wanted to investigate various transactions arising out of the proposed joinder order but Mr North SC said that all of those matters would be dealt with in the valuation exercise that the single expert witness would undertake in respect of the corporate respondent.  In considerable discussion, Mr North pointed to the things that had to be done and all indications were that there was no reason why the matter could not be readied for trial and proceeded with in July.

13. One difficulty about proceeding in July was raised by the proposed respondents’ counsel Mr Moore.  He said that if the parties were joined, his client would not be in a position to proceed because he was going to be overseas on a family holiday for three weeks commencing at the end of June.  There was no evidence of that nor the difficulties that might arise for the proposed traveller in returning early or not going.  No application was made to vacate the hearing nor could it have been made at this particular juncture. 

14. I do not intend to close my mind to the subject of that application having to be made by the proposed respondents but having regard to the extensive evidence in chief given by the resisting respondent about the various transactions, there would appear to be little further evidence that needs to be filed.

15. Counsel for the husband was adamant that the issue related to the question of the risk of an adjournment.  Senior counsel for the wife was adamant that the wife wanted the matter to be heard and saw no reason why it could not be. 

16. Rule 6.02 of the Family Law Rules 2004 says that a person whose rights may be directly affected by an issue in a case and whose participation as a party is necessary for the Court to determine all issue in dispute in the case, must be included as a party to the case. The rules then provide the machinery provisions for how the joinder is to occur and that can be seen for example in Rule 6.03.

17. The critical questions in this case are:

    (a)are the proposed respondents persons who have rights which may be directly affected by an issue in the case?; and

    (b)is their participation as a party necessary to enable the Court to determine all issues?

18. Dealing with the first issue, the proposed amended application by the wife clearly seeks to set aside transactions involving the proposed respondents which if granted, would have the effect of depleting entitlements that they may have to assets.  The fact that some of those assets have been on-sold or transferred complicates the matter but is not a basis to refuse the joinder because there are other provisions in the law which might compensate the wife if it could be shown that the transaction to which she refers, was a sham. 

19. The second of the considerations is whether or not the joinder is necessary. The critical question in that case is whether or not there are sufficient assets to make adjustments between the husband and the wife so that the s 106B order would not be necessary. The dilemma here is the unknown valuation of the corporate business.

20. In B Pty Ltd and Ors and K and Anor [2008] FamCAFC 113; (2008) FLC 93-380 the Full Court said that evidence in an affidavit was often unsuited to formulate or particularise a cause of action against a third party thereby giving rise to the need for a statement of claim. In this case however, it is clear that the application seeks an order under s 106B of the Act asserting that the transactions impugned have the effect of defeating the claim of the wife. As was said in Gould and Gould; Swire Investments Ltd (1993) FLC 92-434, where a party to the marriage seeks relief against a stranger, the nature of the claim and its basis, must be set out. The claim in this case is set out and the assertion by the wife is that the transaction was a sham. Whether the evidence supports that assertion remains to be seen.

21. In B Pty Ltd and Ors and K and Anor (supra) the Full Court went on to say that sufficient facts had to be asserted to demonstrate that if proved, the law arguably provided the relief sought.  Counsel for the husband said that I could reject the wife’s evidence based upon all of the information in the respective parties’ affidavits.  The difficulty that I have in making such a finding is that whilst the husband sets out the various transactions chronologically, it is asserted by the wife that over the life of the litigation, his story has changed (see paragraph 15 of the affidavit of the wife filed 12 April 2011).  She asserted that in respect of the affidavit of the husband’s evidence in chief, she had not been provided with banking details and she denied the husband’s assertion that his record of payments proved collaterally the existence of the agreement about the sale of the assets.  She also pointed to accounting advice concerning the husband’s “failure to return a capital gain on the purported sale of his shareholding in [Business 1]”.  She said as a consequence, the share sale agreement was a sham.

22. As I discussed during the proceedings, I am not in any position to make a finding of fact one way or the other. The purpose of the application was to join parties and I am satisfied that the requirements of Rule 6.02 had been fulfilled for that purpose.

23. In those circumstances, the joinder is necessary.

I certify that the preceding Twenty Three (23) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 10 May 2011.

Associate: 

Date:  10 May 2011