Ruan & Chui (No 2)
[2023] FedCFamC1F 20
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Ruan & Chui (No 2) [2023] FedCFamC1F 20
File number(s): SYC 4113 of 2018 Judgment of: CHRISTIE J Date of judgment: 25 January 2023 Catchwords: FAMILY LAW – PROCEDURE – Application to join the first respondent’s sister as the third respondent – where the wife seeks a final order that the husband’s sister return funds received by a Company of which she was a shareholder – where the proposed respondent disputes the factual basis for joinder - where the wife has established that the joinder is necessary. Legislation: Family Law Act1975 (Cth) Part VIIIAA, s 106B
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 3.01, 3.03.
Cases cited: B Pty Ltd and Ors & K and Anor (2008) FLC 93-380.
Dare v Pulham [1982] 148 CLR 658.
Wayne & Dillon (2008) 40 Fam LR 543.
Division: Division 1 First Instance Number of paragraphs: 36 Date of hearing: 17 January 2023 Place: Sydney Applicant: Litigant in person Solicitor for the Respondents: Ms Zhang, Sophie Zhang Lawyers ORDERS
SYC 4113 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS RUAN
Applicant
AND:
MR CHUI
First Respondent
MS LIN
Second Respondent
MS J
Third Respondent
order made by:
CHRISTIE J
DATE OF ORDER:
25 January 2023
THE COURT ORDERS THAT:
1.Ms J be joined as third respondent to the proceedings.
2.The applicant, Ms Ruan, file and serve a Joint Balance Sheet on or before 10 February 2023.
3.All other interim applications are dismissed.
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 the pseudonym Ruan & Chui has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CHRISTIE J:
This is an application in a proceeding brought by the wife, Ms Ruan, seeking joinder of a third party.
The respondent to the application in a proceeding is the proposed third respondent, Ms J, who is the sister of the husband in the proceedings. I will refer to her in these reasons as the husband’s sister.
The husband (the first respondent) and his mother (the second respondent) oppose the application.
THE LAW
Applications for joinder are governed by the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”). Rule 3.01 of the Rules deals with necessary parties to proceedings, and provides that:
3.01 Necessary parties
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.
Example: If a party seeks an order of a kind referred to in section 90AE or 90AF of the Family Law Act, a third party who will be bound by the order must be joined as a respondent to the proceeding.
Rule 3.03 provides:
3.03 Adding a party
…
(5) A party who relies on subrule (4) must:
(a) file:
(i) an Application in a Proceeding; and
(ii)an affidavit setting out the facts relied on to support the addition of the proposed new party, including a statement of the proposed new party’s relationship (if any) to the other parties; and
(b) serve on the proposed new party:
(i) a copy of the Application in a Proceeding; and
(ii) the affidavit referred to in subparagraph (a)(ii); and
(iii) any other relevant document filed in the proceeding; and
(c) serve on the other parties:
(i) a copy of the Application in a Proceeding; and
(ii) the affidavit referred to in subparagraph (a)(ii).
Sitting as the Full Court in Wayne & Dillon (2008) 40 Fam LR 543, Warnick J observed:
… 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.
In B Pty Ltd and Ors & K and Anor (2008) FLC 93-380, the Full Court (Faulk DCJ, Coleman and Warnick JJ) allowed an appeal by third parties concerned with relief sought under Part VIIIAA of the Family Law Act1975 (Cth) (“the Act”) and said at [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.
The role of pleadings is to ensure that a party to the case knows the issues they will meet at trial. As the High Court said in Dare v Pulham [1982] 148 CLR 658 (Murphy, Wilson, Brennan, Deane and Dawson JJ writing jointly):
Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it…; they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial…; and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court. Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings…
(Citations omitted)
Here the case is complicated by two factors:
(1)The wife is conducting the litigation on her own behalf without the assistance of legal advice;
(2)The proposed respondent is a properly named party to a subpoena for production in respect of documents which were plainly relevant to the issues to be determined in the case and did not comply with the terms of the subpoena until just prior to the interim hearing.
When the matter came before her Honour Judge Beckhouse in the Federal Circuit and Family Court of Australia (Division 2) the wife had made an application for joinder of the proposed third respondent, which application was dismissed. The application was dismissed on the basis that there was no proof that the application had been served and, in addition, no relief was sought against the proposed third respondent.
When the matter came before this Court on 17 January 2023, the proposed third respondent had been served but it remained the position that no relief was sought by the applicant against the proposed third respondent. The applicant remedied that through her Amended Initiating Application and now seeks the following order:
25. That immediately upon making these orders, [Ms J] is to return the illegal commission received from [G Pty Ltd], owned by Applicant and First Respondent. This is because [G Pty Ltd] has transferred all the husband's and wife's income directly to [E Pty Ltd] to reduce the husband's child support liability without wife's consent.
I have understood this order as either:
(a)An application pursuant to s 106B of the Act to set aside a transaction whereby G Pty Ltd paid E Pty Ltd (as opposed to the husband or an entity in which he had an interest); or
(b)An order directed to a third party to the marriage to pay to a party to the marriage funds to which that party is entitled.
The interim hearing had to be adjourned in circumstances where the respondents to the application had failed to comply with the orders of 29 November 2022 that they file and serve a response and affidavit by 16 December 2022 and indeed the respondents had filed in January 2023. That created a prejudice to the applicant insofar as she, as an unrepresented person who does not have English as her first language, did not have the approximate month which she would have been provided for under the original orders to consider the evidence that had been filed against her.
In addition to that, a subpoena had been caused to be issued to E Pty Ltd on 1 August 2022, a company of which the proposed third respondent was the sole director, from the time in which the company was registered, until the company was deregistered. That subpoena had not been complied with. I was informed by the solicitor who acts on behalf of the husband, second respondent and proposed third respondent that documents had indeed been filed with the Court the day before the interim hearing. Any documents produced by E Pty Ltd are likely to be highly relevant to the case the wife wishes to agitate before me on a final basis and accordingly, it could not be the case that the interim hearing could have proceeded on that date. I made orders and directions which included that the wife amend her Application for Final Orders (if she intended to do so) and provide copies of same to the other parties no later than 4.00 pm the following day.
It is useful to set out those relevant matters which are not the subject of factual dispute so as to evaluate the application for joinder.
The husband and wife separated in February 2017. Prior to separation, they provided services to G Pty Ltd.
The income from G Pty Ltd fell into three categories:
(a)Referral fees;
(b)Commission; and
(c)Management bonuses.
The husband’s income (as the Administrative Appeals Tribunal found in 2020) was as follows:
The father’s 2016 to 2019 taxable incomes are $104,926, $157,355, $128,749 and $49,549 respectively.
…
Information from the Australian Taxation Office indicated that in 2017 and 2018 the father reported income of $339,211 and $268,628, expenses of $231,854 and $195,224 and net profits of $107,354 and $73,399 respectively.
The husband’s sister was not, at the time of the parties’ separation or subsequently, an employee of G Pty Ltd.
In 2018 the husband’s sister incorporated and became the director and sole shareholder of E Pty Ltd.
The husband’s sister says her husband (Mr H) is the primary income earner in her family and she has taken care of her family as a wife and mother for the most part of 21 years. Her husband works in transport. The husband’s sister is not licensed to work in the relevant industry.
In 2018 E Pty Ltd entered into a Referral Services Agreement with G Pty Ltd. That Agreement contained the following clauses:
INTRODUCTION
1.The Company [G Pty Ltd] carried on the business of [sales] services.
2.The Company is licensed to operate the business.
3.The Referrer [E Pty Ltd] is in the business and has clients that would benefit from the Company’s expertise.
…
SERVICE PROVISION AND OBLIGATIONS
(a) The Referrer must (if applicable):
(I) At its own cost, do all things necessary to maintain all licenses, permits, authorities, accreditation and certificates required to operate as a [sales] agent and perform its obligations under this agreement; Referrers in the process of obtaining the necessary licenses, permits, accreditations and certificates will not be permitted to engage in sales, but might be permitted to assist other Referrers.
I accept that the parties do not agree about the financial arrangements for the receipt of the husband’s income after separation. While I am not in a position at an interim stage to hear evidence and cross-examination it is important to understand in broad terms the nature of the more controversial evidence which will be the subject of findings at the final hearing. The wife says:
(a)The husband had previously received commissions, referrals and bonuses as a sole trader;
(b)The husband had G Pty Ltd pay funds owing to him into accounts in his mother’s name after separation;
(c)The husband had G Pty Ltd pay funds owing to him into a company F Pty Ltd after separation; and
(d)The husband had G Pty Ltd pay funds owing to him into a company E Pty Ltd after separation.
The wife’s evidence refers to the findings of the Administrative Appeals Tribunal dated 2020. Those reasons contain the following:
25. The mother provided bank statements (in her possession after she issued subpoenas during the parents' property settlement) held by the father's mother, [E Pty Ltd] and [F Pty Ltd]. The tribunal makes the following findings. During the period 21 October 2016 to 31 March 2017 [G Pty Ltd] deposited $177,100.59 into an account held by the father's mother, and a further $205,800 into the same account during the period 1 February to 9 August 2019. At hearing the father stated that on some occasions he would transfer funds to his mother as she recommended sales to him.
…
27. [E Pty Ltd’s] registered address is identical to that listed as the father's personal bank statements. The tribunal finds that during the period 1 June 2018 to 6 June 2019 [G Pty Ltd] deposited $214,255.50 into [E Pty Ltd’s] bank account; cheques totalling $180,754.5 [sic] were also deposited into the account, in addition to cash deposits of $235,000.
The husband’s sister says that any monies deposited to the account of E Pty Ltd were monies to which she was entitled.
In her affidavit she says “I worked as casual commission basis sales in [G Pty Ltd] between around May 2018 and November 2019” (per original).
The Commonwealth Bank of Australia account for E Pty Ltd is in evidence before me. It was opened in May 2018. The address of that bank account is P Street, Suburb Q. That would appear to be the residential address of the husband’s sister but also an address at which the husband has received some bank statements for accounts in his name and in his name jointly with his mother.
In June 2018 the first commission in the sum of $51,297.44 was deposited. The account was also credited with amounts from G Pty Ltd designated “Manager Bonus”.
The wife says the husband’s sister is a necessary party to the proceedings because she received commissions to which the husband was entitled. The husband and his sister deny that was the case.
The solicitor for the respondents, while referring to a superseded Rule, correctly summarised the legal position in her written submissions. She argued that the wife had failed to establish the necessity of joinder.
The wife seeks that the husband’s sister repay those commissions. If the wife is to obtain that order then the husband’s sister is a necessary party.
I also consider that in order for me to make a finding as to whether the wife is correct or the husband and his sister are correct then it will be necessary to hear evidence from the husband’s sister. I accept that if her role was confined to that of witness only then I may not be persuaded that she is a necessary party. In that regard I accept the submission of the respondents’ solicitor that the joinder must be more than useful, it must be necessary.
I reject the argument on behalf of the husband’s sister that the wife has not pointed to any evidence to support the submission that the monies paid to E Pty Ltd by G Pty Ltd were monies which had been earned by the husband. There are several factors which point towards that conclusion, as outlined above.
It is not my role at this stage to find whether the wife is correct in her assertions. It is merely necessary for me to understand the case she makes, find that there is some evidence (which if accepted) would support that case and then as a consequence answer the question: is the husband’s sister a person who 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. If so, her joinder is required.
I find that the rights of the husband’s sister would be affected if I made an order requiring her to pay monies to the husband and wife. I find her participation is necessary to allow me to determine all issues in dispute.
The interim applications initially dealt with subpoenae compliance but that issue was not agitated nor did any party make any submissions about other case management issues, so save making a direction about the joint balance sheet I propose (except as otherwise set out here) to dismiss all outstanding interim applications and proceed with the final hearing as listed.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Christie. Associate:
Dated: 25 January 2023
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