Muker & Syed
[2023] FedCFamC1F 472
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Muker & Syed [2023] FedCFamC1F 472
File number(s): MLC 11688 of 2020 Judgment of: CARTER J Date of judgment: 9 June 2023 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – joinder – application by the second and third respondent for joinder of an entity and the ex-director of the aforementioned entity – whether it is necessary to join the two respondents to the proceedings – where the two respondents should be joined to the proceedings Legislation: Family Law Act 1975 (Cth) s 79
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 3.01
Cases cited: Wayne & Dillon and Anor (2008) 40 Fam LR 543 Division: Division 1 First Instance Number of paragraphs: 83 Date of hearing: 24 April 2023 Place: Melbourne Solicitor for the Applicant: Lawyers of Preston Solicitor for the First Respondent: BTT Lawyers Pty Ltd Solicitor for the Second and Third Respondents: Fernandez & Johnson ORDERS
MLC 11688 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS MUKER
Applicant
AND: MR B SYED
First Respondent
MR C SYED
Second Respondent
MS SYED
Third Respondent
order made by:
CARTER J
DATE OF ORDER:
9 June 2023
THE COURT ORDERS THAT:
Mention
1.The proceedings are adjourned to 25 August 2023 at 10:00am for mention hearing.
Joinder of respondents
2.Ms Malhotra be joined to the proceedings as the fourth respondent.
3.G Pty Ltd be joined to the proceedings as the fifth respondent.
4.Within seven days the second respondent serve a copy of these orders and the Reasons for Judgment on Ms Malhotra by email to …@....
5.Until further order, service of Ms Malhotra shall be effected by email at …@... and personal service is otherwise dispensed with.
Trustee in Bankruptcy
6.Within seven days the applicant serve upon the Trustee in Bankruptcy a sealed copy of these orders and the Reasons for Judgment.
Trial directions
7.The applicant file and serve upon all other parties by 26 June 2023:
(a)an Amended Application setting out with precision the orders to be sought; and
(b)the affidavits of evidence in chief of all witnesses including one consolidated trial affidavit by the applicant (noting that affidavits previously filed cannot be relied upon as evidence in chief).
8.The applicant pay all setting down and trial fees 28 days prior to trial.
9.The first respondent file and serve upon all other parties by 10 July 2023:
(a)an Amended Response setting out with precision the orders to be sought;
(b)the affidavits of evidence in chief of all witnesses including one consolidated trial affidavit by the first respondent (noting that affidavits previously filed cannot be relied upon as evidence in chief).
10.The second and third respondents file and serve upon all other parties by 24 July 2023:
(a)an Amended Response setting out with precision the orders to be sought;
(b)the affidavits of evidence in chief of all witnesses including one consolidated trial affidavit by the second and third respondent (noting that affidavits previously filed cannot be relied upon as evidence in chief).
11.The fourth and fifth respondents file and serve upon all other parties by 7 August 2023:
(a)a Defence to the Statement of Claim filed 6 February 2023; and
(b)the fourth respondent only file affidavits of evidence in chief of all witnesses including one consolidated trial affidavit by the fourth respondent.
12.The applicant file and serve by 21 August 2023 a short affidavit in reply confined to matters not included in her trial affidavit.
13.No party file any further material other than as provided by these orders without leave of the Court.
14.Prior to commencement of the trial, the parties determine whether there are to be any rulings required arising out of objections to evidence and such objections be referred to in the parties' outlines of case.
15.All parties have leave to issue subpoena(s) for the production of documents or attendance of a witness at the final hearing.
16.All parties have liberty to approach the registrar responsible for the management of the Court file to vary the obligations under these orders to ensure readiness for trial.
17.Should any party fail to comply with these orders or the ensuing amending directions of the docketed registrar:
(a)the Court may re list the case requiring the parties to justify why it should not be taken out of the list; and
(b)the party who has complied may immediately thereafter file an application in a case supported by an affidavit seeking for the matter to proceed on an undefended basis.
18.No later than seven days prior to the trial date, all parties shall file and serve a case outline document which shall include:
(a)a list of the material relied upon;
(b)a list of the applications and affidavits to be read and, if not the whole affidavit, the relevant paragraphs relied upon;
(c)a bullet-point summary of argument in relation to the issues in dispute;
(d)a brief chronology listing significant events that are relevant to the issues to be determined by the Court;
(e)the final orders sought;
(f)in a property case, a table listing all of the assets, liabilities and financial resources claimed to be relevant to the dispute, with the values contended for by each party and the main contentions on disputes as to:
(i)the assets and liabilities available for division;
(ii)the value of items where the value is in dispute;
(iii)contributions claimed or contended for and the percentage-based adjustment on contributions contended for;
(iv)relevant s 75(2) factors and the percentage-based adjustment contended for; and
(v)any further factors relevant to determining a 'just and equitable' division of property;
and such case outline be sent to Chambers as a word document.
19.No later than seven days prior to the trial date the applicant is to electronically provide to chambers in word format a joint minute setting out precisely the issues that are agreed and those issues that require determination by the Court.
20.The practitioners for the parties file and serve electronically and send a copy to …@... seven days prior to trial date the following:
(a)a joint asset pool of agreed and not agreed assets and liabilities;
(b)a trial plan; and
(c)a list of objections to evidence upon which rulings are required.
21.Each party provide to the Court at the commencement of the hearing, a statement setting out the costs incurred to that date and from what source those costs have been paid and what costs are expected to be incurred until the completion of the hearing.
AND THE COURT NOTES THAT:
A.Ms Malhotra was not present at the interim defended hearing on 24 April 2023.
B.The matter has been set down for a final hearing on 4 September 2023 for four days to commence at 10:00 am.
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).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish 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 a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUSTICE CARTER
INTRODUCTION
The parties in this matter are the applicant wife, the first respondent husband, and his parents as the second and third respondents. The substantive issues in dispute, which at this stage require a final hearing, include the parenting dispute between the husband and the wife, and the property issues between the husband, the wife and his parents.
The husband is an undischarged bankrupt. The orders made by a Judicial Registrar on 19 September 2022 record that she was informed the Trustee in Bankruptcy had been made aware of the proceedings since their commencement, but had not sought to take an active role. There was no appearance by or on behalf of the Trustee in Bankruptcy when the matter was listed before me.
The proceedings were initiated by the wife on 27 October 2020. At that time the wife included her parents in law as the second and third respondents. She also named Ms Malhotra and Mr Malhotra as additional respondents. Ms Malhotra is the husband’s cousin and Mr Malhotra is her husband. The interim dispute that is now before me is whether Ms Malhotra should be joined to these proceedings, and whether the company that the wife and Ms Malhotra operated – G Pty Ltd – should also be joined.
By way of background, the family, with other relatives and friends, were involved in contracts mostly with H Pty Ltd, to operate businesses through various entities. There is no agreement as to how the purchases of the businesses were funded, or how the profits were applied upon the cessation of the various operations.
In summary, the wife asserts she contributed to the purchases of various enterprises, providing savings, and obtaining personal loans from lending institutions to contribute. Accordingly she says she was entitled to receive a share of the profits as each enterprise was sold. Instead, she said the profits from each business were generally controlled by the second respondent, and in part kept by him, or otherwise rolled over into successive enterprises. The wife described this as a “chain of businesses”, with the funds “going from one business to buying another”, with the second respondent managing the funds, including her share of the profits and proceeds, and consolidating them in accounts operated by him, and reinvesting them in the various business endeavours.
Conversely, the second respondent asserts that the wife has made no financial contribution at all to any of the companies or various businesses. He asserts he started with funds he saved himself and brought from Country J, and that the wife has never borrowed funds to assist the business, nor contributed savings of her own towards any of the enterprises. He says her role in the various businesses was extremely limited. He said accordingly the wife has never been entitled to receive any of the funds from the entities, and at all times held any interest she had in the companies on trust for him.
The second respondent also asserts that he loaned G Pty Ltd funds to purchase a business in Suburb K. He said the wife and Ms Malhotra wrongly arranged for the monies paid to G Pty Ltd to be paid to the wife personally and they have seen been disbursed by her, when the monies should have been returned to him.
The wife does not concede the second respondent loaned G Pty Ltd funds. She says the funds physically provided by the second respondent reflected her share of profits from the sale of earlier business ventures. She says in addition she took out a personal loan to purchase the Suburb K business.
There have already been an inordinate number of affidavits filed in these proceedings – some of which are repetitive and unhelpful. I note further that at times broad and unparticularised statements and claims are made, which does not assist. There have also been a number of interim appearances and hearings – with little progress being made towards a finalisation of the matter. There is much in dispute, which of course cannot be unpicked at this interim stage – and which I anticipate will be difficult to determine at a final hearing in circumstances where the affidavit material is at time vague, and each party is likely to assert the other has not provided complete disclosure. The parties must give careful consideration to what claims can be corroborated with documentary evidence, and what they will actually be able to establish at a final hearing.
I also expect each party has already incurred substantial legal fees. Significantly more will be incurred if the parties are unable to resolve their dispute and the matter proceeds to a final hearing. Given the matter is complex, it would be appropriate that the parties’ solicitors brief experienced counsel. I note that the pool of assets is modest. I understand the equity in the former matrimonial home is between $200,000 to $250,000. The husband and wife are to share the costs of obtaining an updated valuation of that property. The monies retained by the wife, and contested by the respondents, totals around $220,000. There are contested liabilities. In all the circumstances, the parties would be well served in resolving their dispute to save themselves the financial and emotional stress of a final hearing.
HISTORY OF THE ENTERPRISES
Doing the best I can on the material that is currently before me, I understand the four relevant entities in the family group are as follows:
L Pty Ltd
L Pty Lt was established in 2013. Between 2013 and 2015 L Pty Ltd operated a business in City M, and then a Q Company franchise in Suburb N in 2015 to 2017. In 2018, L Pty Ltd commenced operating an S Company franchise at Suburb P, which it ceased in mid-2020.
The wife said initially the husband held 50% of the shares in L Pty Ltd and the other shareholders were the second respondent and the husband’s sister in law. At separation, in mid‑2020, the wife was the sole director and held a 50% share in the company. The second and third respondents each held a 25% share in the company.
The wife asserts she contributed financially to the entity as the husband and wife saved around $60,000 to $70,000 which they put towards the purchase of the City M business. She and the husband also said they borrowed funds from a lending institution that they contributed, and the husband said he worked in the business seven days a week. The wife said when L Pty Ltd purchased the Q Company business, she personally borrowed a further $30,000 from the ANZ bank which went towards the costs of that purchase.
The second respondent denies the wife contributed any funds towards her 50% shareholding in the entity. He says her shares were accordingly held on trust for the second respondent. He said the funds to purchase at least that first business came from his savings accumulated by him in Country J and brought to Australia when he migrated here in 2007.
The second respondent said that when the Suburb P business was purchased in 2018, he paid $114,000 from his personal savings to effect the purchase, and otherwise borrowed funds from R Pty Ltd, another entity established by the family.
L Pty Ltd ceased operating the business at Suburb P in mid-2020. A termination deed was executed. Shortly after that, the sum of $282,000 was paid to the company by S Company and then removed by the second respondent. S Company did not immediately refund the $50,000 bond to L Pty Ltd.
The wife said despite her being a 50% shareholder, and the sole director of L Pty Ltd, the termination deed executed by the company was completed without her knowledge or consent, and that the husband forged her signature on the documents. The wife contends she was entitled to a share in the monies paid by S Company and that the withdrawal of the funds by the second respondent from L Pty Ltd was not authorised.
The second respondent does not agree the wife had any entitlement to those monies. He said those funds have been expended by him on a number of personal and business expenses, including to meet outstanding liabilities of L Pty Ltd, to repay the loan to R Pty Ltd for funds borrowed by L Pty Ltd to purchase the Suburb P business, to meet his legal fees, to repay a person loan and to purchase another business.
The bond was paid by S Company in late 2020 to the wife’s personal bank account, as directed by the wife. The second respondent asserts she was not entitled to receive and retain those funds.
The wife did not advise the other parties that she had received the bond until some months had passed.
T Pty Ltd
T Pty Ltd was established in late 2017 by the parties, together with family friends. It operated a business in Suburb V between 2017 and 2019. That business was purchased from S Company for $350,000 plus additional funds for stock and product. To fund the purchase, T Pty Ltd drew some funds from L Pty Ltd after the Q Company business was sold.
The wife was the sole director of T Pty Ltd. She and the second respondent each held a 25% share in T Pty Ltd and the family friends held the remaining 50% shares.
The second respondent deposed that the family friends paid for their shareholdings in the company. He said the wife did not contribute any funds at all, and was holding her shares in the company on trust for him.
The wife deposed that the family friends did not make any financial contribution to this entity.
T Pty Ltd sold the business in 2019 and received $650,000 from S Company.
The wife contends as a 25% shareholder in the company, she was entitled to receive a quarter of the funds paid by S Company.
That is denied by the second respondent. He said the family friends were also repaid their contributions and he received $287,500 from the funds from S Company. The second respondent says the funds he received from the sale of the Suburb V business were the source of funds he later lent to G Pty Ltd.
R Pty Ltd
R Pty Ltd was established in around 2018. R Pty Ltd contracted with S Company to operate a business in Suburb U from around 2018 until mid-2020. Some of the monies from the sale of the Suburb V business operated by T Pty Ltd appear to have been used to purchase this business.
The wife and Mr Malhotra each held 33% of the shares. The third respondent held 34%.
The wife said she was not informed about the sale of the Suburb V business at the time trading ceased. She said R Pty Ltd, or the second respondent, received around $120,000 from S Company when R Pty Ltd ceased operating the business.
As best I can tell, the second respondent says R Pty Ltd received $57,000 from S Company when it ceased operating the business. He said the third respondent and Mr Malhotra both received their share of the profits. He said the wife did not contribute any funds to the business, and was holding her shares on trust for him. Accordingly he says she was not entitled to receive any share of the profits or proceeds of sale.
G Pty Ltd
This was established in around late 2019. The wife and Ms Malhotra were both 50% shareholders and directors.
G Pty Ltd contracted with S Company to operate a business in Suburb K until late 2024. It is very much in dispute as to how the purchase of the business was funded.
The second respondent said he provided G Pty Ltd with loans totalling $220,000 to purchase and operate the business, and that Ms Malhotra contributed $33,000. The second respondent again said the wife did not contribute any funds to the business and held her shares in G Pty Ltd on trust for him.
I understand the wife acknowledges the second respondent physically provided funds towards the purchase of the Suburb K business from bank accounts operated by him. However she said those funds were monies to which the wife was entitled as a result of her contributions to, and shareholdings in the other companies as outlined – which had been previously retained by the second respondent and not distributed to her. She also said she took out a personal loan of $47,700 in late 2019 which she contributed towards the purchase of the business. The wife said Ms Malhotra did not make any financial contribution towards the purchase of the business.
The agreement with S Company was terminated in late 2020. At that time the second respondent said the wife removed $10,900 from G Pty Ltd’s trading account in late 2020, which triggered S Company to terminate the deed. He said S Company continued with that termination notwithstanding that the second respondent allegedly loaned the wife a further $11,000 by paying that to G Pty Ltd to cover the wife’s withdrawal.
The second respondent said G Pty Ltd was obliged to immediately repay the $220,000 loan to him when the contract with S Company was terminated.
That is not agreed by the wife.
The wife then received, and retained, the sum of $159,746 owing to G Pty Ltd by S Company following that termination. That sum was – as directed by the wife and Ms Malhotra – paid into the wife’s personal bank account in early 2021.
At the time trading ceased, G Pty Ltd had approximately $41,000 in the bank. I was informed at the interim hearing those funds remained intact.
It is notable that the wife received the payments from S Company:
(a)in late 2020 – being the $50,000 bond owed to L Pty Ltd; and
(b)in early 2021 – being the $159,746 owing to G Pty Ltd
after these proceedings were on foot. The wife was well aware when she received those funds that the second respondent denied she had any entitlement to those monies. Indeed, the wife deposed in her affidavit material filed on 27 October 2020 and 11 November 2020 that the funds due from S Company (which were then expected to total $190,000) were “sitting safe with [S Company] till we come to an agreement about the distribution of money”.
Notwithstanding those assurances, in December 2020, the wife and Ms Malhotra signed a notice to S Company requesting that the payout to G Pty Ltd be paid into an account in the wife’s sole name.
On 19 January 2021, soon after the payment was made to her, the wife filed a Notice of Discontinuance in relation to her applications regarding Mr and Ms Malhotra. They were subsequently removed as parties.
On 3 March 2021 the second respondent filed an Amended Response seeking, inter alia¸ that the funds held by S Company and owing to L Pty Ltd and G Pty Ltd be paid to him. The wife did not inform the other parties that she had received – and substantially dissipated the funds – until sometime in April 2021.
The wife says there was nothing untoward or inappropriate with the funds being paid to her, as she denied owing monies to the second and/or third respondents. I accept that is the wife’s position in these proceedings. However, it was patently clear to the wife at the time she received – and then disposed of those funds – that her entitlement to those funds was very much an issue in dispute in the proceedings.
On 23 April 2021 orders were made requiring the wife to provide a full accounting as to how she had expended the funds she received from S Company. The wife has deposed that the funds were disbursed as follows:
(a)the sum of $80,000 was provided to her friend Mr W, who she ‘thinks’ then provided it to other friends who took the funds to Country J to repay an alleged debt the wife owed to her own mother;
(b)the sum of $25,000 has been paid in legal fees;
(c)the sum of $40,000 was paid to Mr W, to repay him $40,000 he allegedly loaned to the wife between early and late 2020 for living expenses and legal fees. No detailed breakdown of that alleged borrowing has been provided.
(d)she paid $16,000 to meet outstanding mortgage payments, $9,000 for her credit card, and $2,000 for rates. She deposed that the remaining funds were spent on day to day expenses for herself and the children.
I note that the wife’s mother is not on affidavit corroborating the wife’s assertion that she owed any funds. Nor is Mr W either as to the funds allegedly owing to him or as to the arrangements allegedly made to provide funds to the wife’s mother in Country J via third parties. Additionally, the wife’s financial statement filed on 27 October 2020 did not plead any debt owing to her mother or to Mr W. Nor are these alleged loans mentioned in the wife’s affidavit material. These matters will no doubt be the subject of cross examination at trial.
On 17 May 2021 orders were made by Johns J requiring the respondents to detail how the $282,000 they had retained from the payment to L Pty Ltd had been applied. The wife was restrained from otherwise dealing with the $50,000 she received in late 2020 and the further $159,746 she received in early 2021. It was noted that by the date of those orders the wife had only $12,000 left of the funds she received from S Company.
On 2 June 2021 the second respondent filed a second Amended Response to Initiating Application, seeking final orders inter alia that the wife relinquish all her interests in the entities and a declaration that the wife holds her interests in the various entities on trust for the second respondent. Damages under the Corporations Act 2001 (Cth) of $225,655 for the removal of funds from G Pty Ltd and L Pty Ltd were also sought.
In mid-2022, the wife deregistered L Pty Ltd. She has not, despite being requested by the second respondent to do so, provided an explanation for that deregistration.
On 20 September 2022 the second respondent filed the current Application in a Proceeding as set out. That was amended on 11 November 2022.
Orders were made on 17 October 2022 regarding filing a single consolidated affidavit to support the parties’ positions in relation to the orders sought by each of them on an interim basis. A Statement of Claim was to be exhibited particularising the claims made by the second respondent against each proposed new party and identifying the precise relief sought. Service was to be effected on the proposed new parties.
No Statement of Claim was filed. The affidavit material filed was also not compliant with the orders made.
The matter came before me for the first time on 2 December 2022. I made orders for the second and third respondents to file a Statement of Claim, and to serve that on Ms Malhotra. I listed the matter for interim hearing which took place on 24 April 2023 regarding the issue of joinder and gave the matter a final hearing date for 28 August 2023.
THE INTERIM DISPUTE
The application the Court is asked to determine at this interim stage is the Application in a Proceeding originally filed on 20 September 2022 (and then amended on 11 November 2022) by the second and third respondents. They seek to join:
(a)G Pty Ltd; and
(b)Ms Malhotra.
In the Application in a Proceeding, the second and third respondents also sought the joinder of L Pty Ltd. However, that part of the application was abandoned as the entity has been deregistered.
Ms Malhotra was not at the interim hearing.
I note that Ms Malhotra initially participated in the proceedings, having been named by the wife as a party. She appeared on her own behalf at the earlier hearing dates. However she was removed as a party after the wife filed the Notice of Discontinuance in so far as she sought orders against Ms Malhotra. As indicated, that was after Ms Malhotra had assisted the wife in securing the funds from S Company to G Pty Ltd being paid into the wife’s personal account.
Attempts have been made to bring these proceedings to the attention of Ms Malhotra including attempts to provide personal service, which have not been successful. The second respondent has sent the interim application and affidavit in support to the email address that Ms Malhotra previously provided to the Court when she was engaging in the proceedings. There has been no response from Ms Malhotra. She is no longer residing at the address she has previously lived at. Nor does anyone have any other contact address or contact phone number for her. No party has heard from her for some time. None of the parties knows her current whereabouts or any way they can contact her other than through the email address she previously provided to the Court.
The interim application includes an application to dispense with personal service on Ms Malhotra, and that she be served in future by email.
I am satisfied that all steps have been taken to advise Ms Malhotra of this interim application and of the hearing. That includes having sent the relevant documents to Ms Malhotra to the email address Ms Malhotra previously provided to the Court. It does appear likely that she is ignoring attempts to serve her. In all the circumstances I am satisfied she knows, or should know of these proceedings. I am accordingly prepared to hear the interim application and make these orders despite Ms Malhotra’s non-appearance.
In the circumstances, I am also satisfied that it is appropriate that service continue to be effected on Ms Malhotra via her email address until further order.
Legal principles
As set out at section 79(10)(b) of the Family Law Act 1975 (Cth) (“the Family Law Act”), “any other person whose interests would be affected by the making of the order” as sought is entitled to be joined as a party to the proceedings. Rule 3.01 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) also provides that:-
A person whose rights may be directly affected by an issue in the 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.
The meaning of “necessary” has been considered in a number of decisions. It has been held by Warnick J in Wayne & Dillon and Anor (2008) 40 Fam LR 543 to mean more than “useful” or “expeditious”. His Honour further noted at [19]:-
…if a cause of action, recognisable at law, against a “third person” is particularised, then it is at least highly likely that joinder will be “necessary for the court to completely and finally determine all matters in dispute”.
Leave is required to join additional parties at this stage of the proceedings. The application is to be served on the proposed party, together with the affidavit in support of the application. I have already referred to the issue of serving Ms Malhotra.
Are they necessary parties?
It is asserted by the second respondent that both G Pty Ltd and Ms Malhotra are necessary parties.
In the Statement of Claim filed on 6 February 2023 by the second respondent, it is contended that Ms Malhotra, the wife and the second respondent entered into an agreement that G Pty Ltd would be used as a vehicle to purchase and operate the business in Suburb K. As already set out, Ms Malhotra and the wife are equal shareholders in G Pty Ltd. It is claimed that it was agreed the second respondent and Ms Malhotra would loan the company funds, and if the business ceased trading he and Ms Malhotra would be repaid the funds they had provided for the establishment of the business. It is asserted Ms Malhotra provided $33,000 to G Pty Ltd and the second respondent provided $220,000 pursuant to that agreement.
As already noted, G Pty Ltd purchased the business, and operated it from late 2019 until late 2020.
It is further articulated in the Statement of Claim that upon G Pty Ltd ceasing to operate the business, G Pty Ltd had an obligation to immediately pay the second respondent the funds he had advanced, and both the wife and Ms Malhotra had an obligation to ensure that G Pty Ltd did so. It is asserted that in breach of the agreement, the wife and Ms Malhotra directed S Company to provide the funds owed to G Pty Ltd to the wife’s personal bank accounts.
Additional claims articulated in the statement include an asserted breach of fiduciary duties by the wife and Ms Malhotra in their capacity as company directors; that it was unconscionable for the wife and Ms Malhotra to deny the second respondent reimbursement of his capital contribution to the business; and that the second respondent is entitled to damages as the wife and Ms Malhotra have engaged in conduct in contravention of the Corporations Act 2001 (Cth) by seeking to permanently deprive G Pty Ltd of its funds and prejudicing the second respondent’s ability to recover the money G Pty Ltd owes to him.
The second respondent says Ms Malhotra knew at all material times that he was owed $220,000 from G Pty Ltd, and that Ms Malhotra had given him an undertaking that G Pty Ltd would repay him those funds. He says Ms Malhotra knew the wife had not made any financial contributions to G Pty Ltd from her own funds. He says Ms Malhotra has breached her duties as director of G Pty Ltd in providing her authority to S Company to pay the monies into the wife’s personal accounts. It is asserted by the second respondent that the wife and Ms Malhotra have conspired together to defeat the second respondent’s claims, and to remove company funds.
Only the wife opposed the joinder application. Her opposition to that was not well articulated. Put simply, the wife says that these proceedings are already complicated, and will be further complicated by allowing the second respondent to join additional parties. Accordingly, the second respondent should pursue any remedies he may seek against G Pty Ltd and Ms Malhotra in another, more suitable jurisdiction.
Determination
In the extant matter it is asserted by the second respondent that the claims contained in his Statement of Claim which fall to be determined include:
·whether the wife and Ms Malhotra have breached their fiduciary duties as directors of G Pty Ltd in directing S Company to repay funds to the wife’s personal account which she then used for personal expenses;
·whether the second respondent has a claim in damages against the wife and Ms Malhotra and/or G Pty Ltd; and
·whether the funds paid to G Pty Ltd were subject to a constructive trust in favour of the second respondent.
The second respondent says these claims arise from the same substratum of facts as fall to be determined in the Family Law Act property proceedings. That includes the financial contributions of the wife, the respondents and Ms Malhotra to the various entities, and the terms of any agreement/s struck.
I understand the wife denies these claims. She also denies she has dealt with company funds in an inappropriate manner. These matters will be explored at a final hearing, and the evidence tested before findings can be made.
In order for the Court to exercise its accrued jurisdiction and determine the claims made by the second respondent that are beyond the jurisdiction conferred pursuant to the Family Law Act, I must consider whether there is a single matter to determine on the basis that the different claims of the various parties arise out of a common substratum of facts; or if the claims are so related that to determine one I must also determine the other. This is a matter of impression and practical judgement. It is a broad test – to enable cases that are not completely disparate being determined in the one set of proceedings.
It does not appear to me to be in dispute that the claims raised by the second respondent arise out of a common substratum of facts. Moreover, I am satisfied that there is but a single controversy, with the parties asserting different claims arising out of a common substratum of fact. It is accordingly appropriate that all matters be heard and determined in the one set of proceedings rather than requiring the second and third respondents – who were joined to these proceedings at the outset by the wife – to pursue alternate claims against the wife, G Pty Ltd and Ms Malhotra elsewhere.
It seems to me that at the final hearing, the Court will need to consider matters including whether the wife owes funds to G Pty Ltd, whether she holds her interest in the company on trust for the second respondent, whether she has breached her obligations to G Pty Ltd, and whether G Pty Ltd owes monies to the second respondent. The question of whether a motor vehicle registered to G Pty Ltd is held on trust by G Pty Ltd for the second respondent or not is another issue in dispute. In those circumstances, it seems both that G Pty Ltd’s rights could be affected by the Court’s determination of those issues, and that G Pty Ltd’s participation in the proceedings appears to be necessary to determine those issues. Accordingly, the company is a necessary party.
I also agree that Ms Malhotra is a necessary party. She is a director of G Pty Ltd. It is asserted that she knew the terms of the provision of the funds from the second respondent to the company, and that she provided an undertaking to repay the funds. The Court will need to consider whether Ms Malhotra breached her obligations to G Pty Ltd, or to the second respondent and whether she conspired with the wife to remove the disputed funds out of the reach of the second respondent. Again it seems both that Ms Malhotra’s rights could be affected by the Court’s determination of those issues, and that her participation in the proceedings appears to be necessary to determine those issues.
I agree that joining Ms Malhotra and G Pty Ltd will make the proceedings more complicated. It will no doubt result in the parties incurring greater legal fees. However, given the circumstances as outlined, and what has been articulated in the Statement of Claim, G Pty Ltd and Ms Malhotra, are necessary parties. Causes of action have been articulated against both G Pty Ltd and Ms Malhotra. Not only may their rights be directly affected by an issue in these proceedings, it also seems to me that their participation as parties is necessary to determine all issues in dispute. I note that the wife initially included Ms Malhotra as a respondent to these proceedings – presumably regarding her as a necessary party at least until S Company had paid G Pty Ltd’s funds into the wife’s personal account.
Accordingly, I grant leave for G Pty Ltd and Ms Malhotra to be joined to these proceedings. I make further orders to ready the matter for a final hearing. For the reasons already outlined, service on Ms Malhotra is to be effected by email communication.
I am mindful that this matter has already had multiple hearing dates. However, I am of the view that a mention to ensure the matter is ready to proceed to trial is necessary, given the parties have failed on occasion to comply with Court orders in relation to the filing of documents. Accordingly, I will list the matter for mention prior to the final hearing date. The orders made for trial preparation are to be wholly complied with. The parties and their representatives should have regard to Part 10.6 of the Rules as to the potential consequences if there is non-compliance. I reiterate my earlier comments – that the pool of funds available for division is quite limited, and if the parties do not resolve the dispute, the legal fees likely to consume a significant proportion of those funds.
I certify that the preceding eighty-three (83) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Carter. Associate:
Dated: 9 June 2023
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