Pacheco & Pacheco
[2023] FedCFamC1F 911
•26 October 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Pacheco & Pacheco [2023] FedCFamC1F 911
File number(s): ADC 5923 of 2021 Judgment of: BERMAN J Date of judgment: 26 October 2023 Catchwords: FAMILY LAW – PROPERTY – DISJOINDER – Farming matter – Where the second respondent seeks to be disjoined from the proceedings – Where the applicant seeks no substantial order in respect of the second respondent – Where the applicant’s claim in respect of the second respondent is yet to be crystalised – Where the applicant foreshadows an Amended Initiating Application – Where the second respondent concedes being rejoined once a claim is properly formulated and orders are sought – Consideration of s 90AE of the Family Law Act 1975 (Cth) – Consideration of s 81 of the Act – Where the applicant is given 14 days to file Amended Application and a statement of claim – Orders. Legislation: Family Law Act 1975 (Cth) Part VIIIAA, ss 79, 79(5), 81, 90AE, 90AE(2), 90AE(3)(a), 90AF
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 3.01, 3.03, 3.03(2)
Cases cited: B Pty Ltd and Ors & K and Anor [2008] FLC 93-380
Gormley & Gormley [2023] FedCFamC1F 296
Hancock Family Memorial Foundation Pty Ltd v Fieldhouse [No 3] [2010] WASC 233
Pagliotti & Hartner (2009) 41 Fam LR 41
Trawl Industries of Australia Pty Ltd v Effem Food Pty Ltd (1992) 108 ALR 335
Wayne v Dillon [2008] Fam LR 543
Division: Division 1 First Instance Number of paragraphs: 78 Date of hearing: 5 October 2023 Place: Adelaide Counsel for the Applicant: Mr Robertson SC and Ms Lewis Solicitor for the Applicant: Jacqui Ion Lawyers Pty Ltd Counsel for the First Respondent: Mr Bullock Solicitor for the First Respondent: Howe Jenkin Counsel for the Second Respondent: Mr Hoffmann KC Solicitor for the Second Respondent: Clelands Lawyers Adelaide ORDERS
ADC 5923 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS PACHECO
Applicant
AND: MR PACHECO
First Respondent
B PTY LTD
Second Respondent
ORDER MADE BY:
BERMAN J
DATE OF ORDER:
26 OCTOBER 2023
THE COURT ORDERS THAT:
1.Subject to the applicant filing and serving, within fourteen (14) days of the date of delivery of judgment, a Further Further Amended Initiating Application setting out a Statement of Claim or a Points of Claim document that establishes a cause of action recognisable at law and appropriately particularised, then B Pty Ltd is disjoined from the proceedings.
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
BERMAN J
INTRODUCTION
By Initiating Application filed 7 December 2021, Ms Pacheco (“the applicant”) sought the following final orders by way of property settlement and division:-
(a)The net non-superannuation assets of the relationship be divided as to 70% in favour of the [applicant] and 30% in favour of the [first respondent]; and
(b)The net superannuation assets of the relationship be divided equally between the parties.
By Amended Initiating Application filed 20 July 2022, the applicant joined Mr C Pacheco as second respondent, Ms D Pacheco as third respondent, Pacheco Family Trust as fourth respondent, B Pty Ltd as fifth respondent, Pacheco Holdings Pty Ltd as sixth respondent and Pacheco Investments Pty Ltd as seventh respondent.
The applicant sought the following orders in respect of the second to seventh respondents:
2.A declaration that the Second, Third, Fourth, Fifth, Sixth and Seventh Respondents hold on trust for the First Respondent various parcels of real estate hereinafter referred to as the "farming property" including but not limited to the property situated at [E Street, Town F] in the State of South Australia and property owned by the Sixth Respondent as trustee for the following trusts:
(a) [G Trust]
(b) [H Trust]
(c) [J Trust]
(d) [K Trust]
(e) [L Trust]
(f) [M Trust]
(g) [N Trust]
(h) [P Trust]
(i) [Q Trust]
(j) [R Trust]
(k) [S Trust]
(l) [T1 Trust]
(m) [T2 Trust]
(n) [T3 Trust]
(o) [U Trust]
(p) [V Trust]
(q) [W Trust]
(r) [AA Trust]
in whole or part on constructive trust for the Applicant and First Respondent herein.
3.A declaration that the Second, Third, Fourth, Fifth, Sixth and Seventh Respondents hold on trust for the First Respondent an interest in the [Pacheco Family Group] including but not limited to the entities known as [Pacheco Holdings Pty Ltd], [Pacheco Family Trust], [B Pty Ltd] and [Pacheco Investments Pty Ltd]in whole or part on constructive trust for the Applicant and First Respondent herein.
4.Such further or other relief as the Court deems fit including such relief as is necessary to give effect to the interest of the Applicant and the First Respondent by way of constructive trust of the farming property.
5.In the alternative to the orders sought, that the Second, Third, Fourth, Fifth, Sixth and Seventh Respondent pay equitable damages or equitable compensation to the First Respondent.
6.Further in the alternative, a declaration that the Applicant and First Respondent hold an equitable lien over the farming property.
By Response to Final Orders filed 27 January 2022, Mr Pacheco (“the first respondent”) seeks final orders for property settlement summarised as follows:
(1)The applicant transfer her right, title, interest and estate in real property situate at BB Street, Town CC (“the Town CC property”) to the first respondent.
(2)That the first respondent transfer his right, title and interest in Motor Vehicle 1 to the applicant.
(3)That the applicant transfer her interest in the recreational vehicle, Motor Vehicle 2and her interest in the Pacheco Family Trust to the first respondent.
(4)That the first respondent pay to the applicant by way of property settlement, the sum of $160,000 within 90 days of the date of final orders being made.
(5)That the parties retain for their sole use and benefit absolutely, the property in their respective possession.
(6)The parties' entitlements to superannuation be equalised by way of a superannuation splitting order.
By Response to Initiating Application filed 31 August 2022, the second to seventh respondents only sought orders that paragraphs 2 to 6 inclusive of the Amended Initiating Application filed 20 July 2022 be dismissed. No orders were sought as to settlement of property as between the applicant and the first respondent.
By letter dated 21 October 2022,[1] the solicitor acting for the second to seventh respondents put the applicant on notice that he considered there were fundamental defects in the applicant’s claim and that unless the orders sought against the second to seventh respondents were discontinued, if ultimately unsuccessful, it was the second to seventh respondents’ intention to seek costs against the applicant and those who may be funding her litigation.
[1] Affidavit of Mr EE filed 14 March 2023, Annexure “A”
The broad challenge to the orders sought by the applicant was that the form of the declarations sought was contrary to accept an authority as to the form of declarations, that the applicant had not presented evidence to establish the basis for the assertion that any of the second to seventh respondents held property on constructive trust for the first respondent and/or the applicant and an assertion that the second and third respondents, fifth and seventh respondents do not own any of the “farming land” in respect of which the constructive trust is asserted. Further, whilst Q Trust owns land, it is not farming land but rather the home of the applicant’s sister-in-law, Ms DD. Finally, the claim in respect of the fourth respondent namely, Pacheco Family Trust can only be made against the Trustee.
By Further Amended Initiating Application filed on 14 June 2023, the applicant discontinued all proceedings against the second, third, fourth, sixth and seventh respondent but not as against the fifth respondent, B Pty Ltd (now the second respondent).
To the extent that it was necessary to do so, the applicant sought leave to join B Pty Ltd as the second respondent to the proceedings pursuant to r 3.03 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”).
The orders sought in the Further Amended Initiating Application follow on from an Application in a Proceeding filed by the second to seventh respondents on 14 March 2023 seeking the dismissal of proceedings against the second to seventh respondents, or in the alternative, that the proceedings be dismissed against the second, third, fifth and seventh respondents.
The applicant’s Response to the Application in a Proceeding filed 12 April 2023 concedes that the proceedings should be dismissed against the second, third, fourth, sixth and seventh respondents but that the applicant is at liberty to continue her claim against the fifth respondent.
The balance of the Application in a Proceeding filed 14 March 2023, namely the disjoinder of B Pty Ltd, is one of the matters for determination.
The other matter for determination relates to extensive orders for discovery as set out in the interlocutory orders sought in the Further Amended Initiating Application filed 14 June 2023. Noting that an order for mutual informal discovery was made by consent on 31 January 2022 and whilst the applicant continues to assert that the first respondent has been recalcitrant in providing discovery and disclosure of documents relevant to an issue in the proceedings, the first respondent contends that substantial discovery has been made and that further documents were provided a few days prior to the hearing on 5 October 2023.
The extent to which the further production of documents may satisfy the orders sought by the applicant either in whole or in part, was not able to be determined and accordingly, the applicant’s application for discovery from the first respondent was adjourned to either 2 or 3 November 2023.
BACKGROUND
The applicant was born in 1979 and is 43 years of age. The first respondent was born in 1977 and is 46 years of age. The parties commenced their relationship in 1995 and were married in 1999 which marked the commencement of their cohabitation.
There are three children of the relationship, Mr X now aged 20 years, Y now aged 17 years and Z now aged 15 years (collectively referred to as “the children”).
Following a relationship of 22 years, the parties separated on 10 February 2021.
Of relevance to the current proceedings is Mr C Pacheco, the first respondent’s father, Ms D Pacheco, the first respondent’s mother and Mr FF and Ms GG being the first respondent’s brother and sister-in-law.
Whilst not agreed, the first respondent considers that the assets and liabilities of the parties are as follows:-
Asset Ownership Value BB Street, Town CC (“the Town CC property”) Joint $550,000 Motor Vehicle 1 Joint $44,000 Recreational vehicle Joint $40,000 Motor Vehicle 2 First Respondent $6,000 TOTAL $640,000
Liabilities Ownership Value Mortgage loan paid by B Pty Ltd to HH Bank ($216,000) Net non-superannuation assets $424,000
Superannuation Ownership Value Superannuation Fund 1 First Respondent $233,890 Unknown Applicant $32,045 TOTAL $265,935
Following the separation of the parties, the first respondent lived in a caravan parked on a property at E Street, Town F (“the E Street property”). This property is registered in the joint names of the first respondent’s parents.
The applicant and the children remained living at the Town CC property which had been the family home since 1999. At the time of first occupation, the Town CC property was owned by the first respondent’s grandparents via the JJ Family Trust.
In 2011, a financial arrangement was undertaken that resulted in the Town CC property being transferred to the applicant and first respondent.
Pacheco Family Group
There appears to be little controversy as to the structure of the entities that comprise the “Pacheco Family Group”. Each of the parties rely upon a document setting out the construct of the Pacheco Family Group as prepared by accountants to the Pacheco family, as at February 2020 and as at February 2021.
Prior to February 2021, B Pty Ltd was the Trustee for the FF Family Trust being the entity associated with Mr Pacheco, the first respondent’s brother and the Pacheco Family Trust being the entity associated with the first respondent.
The directors, secretaries and shareholders of B Pty Ltd were the first respondent and his brother. The appointors of FF Family Trust and Pacheco Family Trust were also the first respondent and his brother. The separate trusts were the partners in Pacheco Family Farming Partnership trading as B Pty Ltd.
The partnership farms land owned by Pacheco Holdings Pty Ltd which is the trustee for a number of land holding trusts as set out in Annexure “A” to the first respondent’s affidavit of 17 November 2022. The first respondent’s parents are the directors, secretaries and shareholders of Pacheco Holdings Pty Ltd.
The first respondent contends that shortly after separation in early 2021, a restructure of the farming partnership took place such that a company known as Pacheco Group Pty Ltd, which had been established in late 2020 comprising the first respondent’s brother Mr FF and his wife as joint directors and shareholders, was appointed as trustee of FF Family Trust replacing B Pty Ltd.
Around two weeks later, the first respondent’s brother was removed as an appointor of the trust and by executed deed of appointment, the first respondent’s father, Mr C Pacheco was replaced as an appointor. He was also reappointed as a director of B Pty Ltd. The contention of the applicant that seeks to illuminate the basis for the joinder of B Pty Ltd as a party to the proceedings is as set out in paragraphs 18 to 22 of the applicant’s affidavit filed 12 April 2023:-
18.No reason or explanation has been provided by the [first respondent] for the change in Appointers of the Trust.
19.Accordingly, the current directors of [B Pty Ltd] are the [first respondent], his father and [Mr C Pacheco] and its current shareholders are the [first respondent] and [Mr C Pacheco].
20.The [first respondent] has an interest in [B Pty Ltd] as a beneficiary of the Trust, as a director of the Partnership and as one of two joint shareholders.
21.I acknowledge that the claim I made by my Amended Initiating Application against [B Pty Ltd] relied on the existence of a constructive trust and that I do not now assert that there is an enforceable constructive trust claim against [B Pty Ltd] based on the conduct of [Mr C Pacheco] and [Ms D Pacheco] dating back to about the time of the commencement of my relationship with the [first respondent].
22.I now seek to continue the claim against [B Pty Ltd] as a party that holds, or holds as trustee, property of the marriage that I am, or may be, entitled to in a settlement made pursuant to s79 of the Family Law Act 1975.
B2 Pty Ltd
The first respondent acknowledges that as a result of a dispute between the brothers, in early 2021 his brother and wife relocated to Western Australia to farm lands purchased by Pacheco Holdings Pty Ltd.
The issue was brought into stark focus by the applicant’s awareness that B Pty Ltd had refinanced its loan from HH Bank to the Commonwealth Bank to enable farming land to be purchased in Western Australia. The applicant, amongst others, was a guarantor for the loan.
There is some uncertainty as to the extent of any interrelationship to the operation of the South Australian and Western Australian farming enterprises utilising farming land.
As a separate, but perhaps related aspect of the Pacheco Farming Group, the applicant obtained by subpoena a letter from KK Accountants to B Pty Ltd dated 30 October 2020. It appears from the body of the document that at that time, the first respondent, the applicant, the first respondent’s brother, the brother’s wife and the first respondent’s parents gave thought to succession arrangements. The report to the directors of B Pty Ltd set out in summary that Pacheco Holdings Pty Ltd is the trustee for various land holding trusts.
The accountant proposed that a new company would be set up as trustee for FF Family Trust being the Western Australian farming enterprise and B Pty Ltd would remain as trustee for Pacheco Family Trust being the first respondent’s South Australian farming enterprise. In order to give effect to the proposal, land in Western Australia would need to be acquired and at that time, held a notional value of $6,250,000. The total indebtedness to the various operating entities would be in the sum of about $13,670,000.
The first respondent admits that as from 1 July 2021, he has been operating a separate entity of operations in South Australia known as B2 Pty Ltd of which he is the sole director and shareholder which acts a trustee of the B Holding Trust of which he is the sole appointor.
As at the date of the first respondent’s affidavit filed 17 November 2022, he considers that no final agreement has been reached between the brothers and their father as to a formal division of the farming operations.
Whilst the current intention of the relevant parties is not known, the admission of the first respondent that the division of the farming enterprise between the two brothers, whether as a result of a disagreement between them or as part of a long term succession plan, may invite a consideration as to whether the proceedings should be adjourned pursuant to s 79(5) of the Family Law Act 1975 (Cth) (“the Act”).
SUBMISSIONS OF THE APPLICANT AND SECOND RESPONDENT
The applicant argues that B Pty Ltd was properly added as a party to the proceedings pursuant to the Rules.
The further contention is that in the applicant’s Response to an Application in a Proceeding filed 12 April 2023, she underpins her claim by seeking the following order:
2.The applicant is at liberty to continue her claim against the fifth respondent as the holder of the property of the marriage that the applicant is or might be entitled to share in upon a settlement pursuant to s 79 of the Family Law Act 1975 (Cth).
As considered, the applicant’s focus is upon B Pty Ltd as the trustee of Pacheco Family Trust. Thirteen days after the parties’ separation, the first respondent’s brother was removed as an appointor and his father was made an appointor.
The applicant’s contention is that the true character of the property trusts is that they are a de facto and a necessary part of Pacheco Family Farming Partnership. I am uncertain as to the applicant’s meaning that the property trusts are “de facto”. The more relevant contention is that the assets of a discretionary trust can be property pursuant to s 79 proceedings. It is that proposition that is the subject of significant opposition by the second respondent.
Also of relevance is the applicant’s position that she will rely on s 90AE of the Act to ensure that B Pty Ltd is bound by the outcome of the proceedings. To the extent that there is a second issue namely, that the applicant may have a substantial liability pursuant to guarantees totalling $12,670,000, the contention of the first respondent is that the applicant no longer bears any liability. It is assumed, that the second respondent will provide a release from the bank in favour of the applicant.
The contention of the second respondent is that where there are no pleadings then the relevance must be assessed by having regard to affidavits filed but even so, a party is not entitled to be joined if there is an ulterior purpose namely to obtain discovery.
The second respondent articulates that no attempt has been made by the applicant to set out the basis of any claim on the assets of B Pty Ltd in circumstances where the first respondent is not the sole or majority shareholder, not the sole appointor of the Pacheco Family Trust and is one of four specified beneficiaries.
The argument by the second respondent in favour of disjoinder has further complexity.
In summary, the second respondent contends that a consideration of property for the purposes of s 79 proceedings should refer to the property of the parties to a marriage. As such, there is significant doubt as to whether without any evidence of control, a beneficiary generally or in this case, the second respondent, whilst holding the position of a joint appointor, being a director of B Pty Ltd and the beneficiary, would have a proprietary interest in the assets of the trust.
It is conceded that some value, albeit with significant difficulty, might attach to a chance or expectancy of a distribution of income or possibly of the capital of the trust fund. In the absence of control or a claim that the trust is in reality a sham or can be seen as the alter ego of the first respondent, the claim is likely to be forlorn of hope.
The further contention is that to give effect to orders that may be sought by the applicant in respect of property settlement, given the current pool of property (excluding any value that the applicant may seek to attach to B Pty Ltd) orders pursuant to s 90AE of the Act may be necessary to satisfy an order made but in this case, likely to be represented by a settlement sum in favour of the applicant. The contention of the second respondent is that Part VIIIAA cannot be used to increase the property of the parties to a marriage nor has it been shown by the applicant that orders she may seek under Part VIIIAA are necessary, appropriate or proper to be made in order to effect a just and equitable outcome.
At present the applicant does not seek any orders against the second respondent. It is agreed that a party cannot be joined merely on the possibility of a claim.
Paragraph 33 of the applicant’s Outline of Case document is in the following terms:
The [applicant] will rely on s 90AE of the Family Law Act 1975 (Cth) to ensure that [B Pty Ltd] is bound by the outcome of the proceedings as between the [first respondent] and [the applicant]. The [applicant] will specifically seek that her substantial liability pursuant to guarantees provided by her which total $12,670,000 are discharged. The [applicant] seeks that [B Pty Ltd] remain a party, inter alia, to ensure that the orders she obtains are not defeated.
As discussed, there is an assertion by the first and second respondents that the applicant has been released from her personal guarantee and as such what remains is the applicant’s reliance on s 90AE to in some way bind or involve B Pty Ltd in the outcome of the proceedings.
LEGAL PRINCIPLES
Rule 3.01 provides as follows:
A person whose rights may be directly affected by an issue in a proceeding, and whose participation as a party is necessary for the court to determine all issues in dispute in the proceeding, must be included as a party to the proceeding.
The Rule provides that certain persons are automatically parties to the proceedings.
A “necessary party” can extend to a third party who will be bound by an order under s 90AE or 90AF of the Act. The intent of the Rule is to consider whether the substantive rights of a third party would be affected by the orders sought.
In Wayne v Dillon [2008] Fam LR 543 (“Wayne”), a joinder of a third party was discharged because the applicant did not particularise a cause of action and whilst a statement of claim in support of a joinder application is not required, something similar should be provided to establish that the joinder is necessary in order to bring finality to the proceedings.
Rule 3.03(2) provides that a party may add another party after a proceeding has started by amending the application or response to add the name of the party.
In B Pty Ltd and Ors & K and Anor [2008] FLC 93-380 the Full Court said as follows:
52.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.
In Trawl Industries of Australia Pty Ltd v Effem Food Pty Ltd (1992) 108 ALR 335 Gummow J said at page 347:
53.However, as indicated above, for the law of Australia it is most suitable to focus upon the substance of the two proceedings as distinct from their form. This reflects the constitutional basis of federal jurisdiction, to which I have referred earlier in these reasons. Also, it allows for the very many controversies which now come before superior courts, federal and State, without pleadings. And even where pleadings are necessary or are ordered, the effect of the Judicature system of pleading, now in general operation in Australia, is as described by Barwick C.J.:
"(T)here is no necessity to assert or identify a legal category of action…It is sufficient in matters in the Federal Court to assert the facts on which the plaintiff or applicant party relies and to nominate the remedies which he seeks as a consequence of the occurrence of those facts."
(Philip Morris Incorporated v Adam P. Brown Male Fashions Proprietary Limited (1981) 148 CLR 457 at 473).
The above was quoted with approval by the Full Court in Pagliotti & Hartner (2009) 41 Fam LR 41.
This Court does not rely upon or require pleadings. It is permissible to gain an understanding of the nature and extent of the claim and the particulars of the claim from documents properly identified. In this regard, the substantial affidavit material and written submission documents seeks to set out the parameters of the applicant’s claim. It is not for me to determine to finality the orders sought by the applicant against the second respondent unless I am satisfied that they are so lacking in any merit that they would not be able to resist an application for summary dismissal.
In Gormley & Gormley [2023] FedCFamC1F 296, Campton J said:
33.In Hancock Family Memorial Foundation Pty Ltd v Fieldhouse [No 3] [2010] WASC 233 Le Miere J… articulated, in precise terms, why it is necessary for a party seeking to join a third party to litigation to establish an arguable case, in the following terms:
27.The applicant on a joinder application must show that there is an arguable case sufficient to resist the entry of summary judgment by the parties sought to be joined. It would be futile to order that a person be joined as a defendant if the material before the court disclosed that if the person, having been joined as a defendant, applied for summary judgment the application would succeed.
It could not be said that the applicant presents or relies upon a formulated statement of claim or even a document that sets out the points of claim. As discussed, the applicant’s contention is that B Pty Ltd is a party that holds, or holds as trustee, property of the marriage to which the applicant is or may be entitled to a settlement made pursuant to s 79 of the Act. It is not asserted that B Pty Ltd is either a sham or the alter ego of the first respondent.
In the applicant’s Outline of Case Document she contends that:
23.The assets include the [the first respondent]’s direct or indirect interests in the land and farming operations on the basis that the strictly legal structure of the assets will defeat [the wife’s] proper interests in the matrimonial property.
As best as can be understood, it could not be said that B Pty Ltd is property of the parties or of the first respondent but rather at this stage, and without more, must be confined to the value of any of the first respondent’s interest in B Pty Ltd arising from his involvement as a joint appointor of the trust, a director of B Pty Ltd and as one of four specified beneficiaries.
The applicant’s position as to the underlying expectation of the applicant is set out in the applicant’s Outline of Case Document as follows:
11.This is an orthodox “farming case” wherein vast land holdings are held in various trusts and the operations of the farm(s) is undertaken by a separate entity, in this case until recently, a corporate partnership. […]. Many of the wider farming assets, divided between various trustees and operating entities have been deliberately alienated from each other. In this case, the alienation occurred pursuant to a plan conceived by the husband’s parents in conjunction with their sons and with the advice of their accountants, [KK Accountants].
(Citations omitted)
By reference to the Pacheco Family Group diagram as prepared by the accountants to the Pacheco Farmery, it would seem uncontroversial that B Pty Ltd does not hold the legal or equitable interest in any of the farming lands held by an array of trusts.
It is not asserted by the applicant that the second respondent held any direct or indirect interest in any of the farming land or in any of the trust entities that hold the land.
Whilst there are some uncertainty as to whether the reference to s 90AE of the Act arises in respect of the applicant remaining liable pursuant to personal guarantees given, the orders sought pursuant to s 90AE(2) of the Act in respect of B Pty Ltd are surprisingly not set out.
The contention on behalf of the applicant is that s 90AE(2)(a) of the Act is required to enable the Court to make an order that “directs a third party to do a thing in relation to the property of a party to the marriage”.
Section 90AE and Part VIIIAA generally cannot be used to enhance the property of the parties but rather as is set out in s 90AE(3)(a) of the Act:
(3) The court may only make an order under subsection (1) or (2) if:
(a)The making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage.
Simply put, orders made pursuant to s 90 to be given affect provided that the checks and balances giving procedural fairness to a proposed third party to be given.
At this stage, the remedy to be sought by the applicant and the mechanism by which that may be given effect against B Pty Ltd, is absent.
Whilst the affidavit material filed by and on behalf of the applicant and the Outline of Case Document as presented for the hearing set out the broad contention of the applicant namely, that in some way the interest in B Pty Ltd as the entity that conducts the farming enterprise in South Australia, it could not be seen as satisfying the following proposition by Warnick J in Wayne (supra) as follows:-
17.As seen, while neither that rule nor the relevant Family Law Rule refers to an applicant for leave to join having to establish a cause of action and supporting “case” which, taken at its highest, is arguable, that test was adopted by the parties before Morgan J and by her Honour. That approach was not attacked in the appeal in B Pty Ltd & K (supra). It is a test consistent with the references, in the passages quoted above from B Pty Ltd & K (supra), to the need for an applicant for joinder to set out the nature of the claim and the basis of it. As also seen, in Gould v Gould; Swire Investments Ltd (1993) FLC 92-434, Fogarty J particularly referred to the need for fairness to the third party. Any person joined to a proceeding ought, at that point, be able to take advice on whether the facts pleaded (if established) would lead to a successful claim. Joinder to litigation is a serious step with often significant financial consequences.
18.The word “necessary” in rule 11.01(1) must mean something more than “useful” or “expeditious”. In my view, if there are available alternative means to joinder to the substantive proceedings, of obtaining from a third person or someone already a party what is needed to allow an applicant for joinder to establish an identified “case”, joinder is unlikely to be “necessary”.
19.However, 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”. Thus, in an application such as was before the Federal Magistrate, such a question falls for consideration.
CONCLUSION
The proceedings were commenced in 2021.
Whilst Kings Counsel for the second respondent urges the disjoinder of B Pty Ltd on the basis that no substantive order is sought against the entity nor is there anything approximating a points of claim document or even an indication of the particulars of claim from the affidavit material of the applicant, a concession was made on behalf of the second respondent that if disjoined, B Pty Ltd could always be added back as a party to the proceedings if the applicant was able to establish a basis to do so.
Section 81 of the Act requires the Court to avoid further proceedings and to determine the litigation between parties to finality.
Kings Counsel for the applicant has foreshadowed that if the disjoinder of B Pty Ltd is successful, there will be another amended initiating application setting out the detail of the orders sought and presumably, by necessary implication, the orders relating to the operation of s 90AE of the Act to give effect to orders made pursuant to s 79.
I propose to dismiss the application of the second respondent that B Pty Ltd be disjoined and give leave to the applicant to file and serve, if so advised, a Further Further Amended Initiating Application setting out with some level of detail either a statement of claim or a points of claim in respect of orders sought against B Pty Ltd within fourteen days of delivery of this judgment.
Whilst I have not heard submissions, the first and second respondents seek costs of this application. At first consideration, there may well be merit in such an application and as such, unless settled, I propose to hear submissions as to costs on a date yet to be fixed.
I certify that the preceding seventy-eight (78) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 26 October 2023
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