Sanders and Sanders & Ors

[2014] FamCA 176

FAMILY COURT OF AUSTRALIA

SANDERS & SANDERS AND ORS [2014] FamCA 176

FAMILY LAW – PROPERTY – Settlement in relation to marriage – Re-hearing following appeal to Full Court – Where neither party has capacity to satisfy order for property division – Not just and equitable to make any order – Application of the husband and application of the wife dismissed
FAMILY LAW – PRACTICE AND PROCEDURE – Application for Leave to Amend during a re-hearing following appeal in the Full Court – Where wife in re-hearing sought to amend application – Consideration of matters relevant to power to permit amendment – Where matters included substantial delay, wasted costs, prejudice and concerns of case management – Where order for costs would not compensate the other parties for prejudice caused by further delay – Where wife should have made Application at early stage in proceedings – Where Leave to Amend denied
FAMILY LAW – PRACTICE AND PROCEDURE – Application for Adjournment pursuant to s 57 of Legal Aid Commission Act 1979 (NSW) – Consideration of “special circumstances” – Application for Adjournment dismissed
FAMILY LAW – EQUITY – Where husband and respondents had signed personal guarantee – Where guarantee secured against matrimonial home – Where matrimonial home sold pursuant to guarantee – Where wife sought orders against the respondents on the basis of equitable contribution – Where right to seek contribution not determined
FAMILY LAW – THIRD PARTIES – Jurisdiction of Court to make orders affecting the property of third parties – Where respondents were third parties– Where property of respondents is not sufficiently connected to the division of matrimonial property
FAMILY LAW – COSTS – Indemnity costs – Where husband and wife sought indemnity costs against each other – Where wife wholly unsuccessful in proceedings – Where wife’s conduct in proceedings would justify order for costs against her – Where wife does not have ability to satisfy order for costs – Where wife made no submissions regarding s 117(2A) – Where husband and respondents do not have ability to satisfy order for costs – All applications for costs dismissed

Family Law Act 1975 (Cth) ss 79; s 85A; s 90AA; s 90AE; s 90AK; s 117(2A)

Legal Aid Commission Act 1979 (NSW) s 57

AC and Ors & VC and Anor [2013] FamCAFC 60
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
B Pty Ltd and Ors & K and Anor [2008] FamCAFC 113
Rowell & Keogh [2011] FamCAFC 74
Sanders & Sanders and Ors [2012] FamCAFC 136
Sexton & Sexton [2012] FamCAFC 218

J O’Donovan and J Phillips, The Modern Contract of Guarantee (Thomson Reuters, 2^nd ed., 2010)

APPLICANT WIFE: Ms Sanders

1^ST RESPONDENT HUSBAND: Mr Sanders

2^ND RESPONDENT: U Pty Limited

3^RD RESPONDENT: CG Pty Limited

4^TH RESPONDENT: S Pty Limited

5^TH RESPONDENT: K Pty Limited

6^TH RESPONDENT: Y Pty Limited

7^TH RESPONDENT: N Holdings Pty Limited

8^TH RESPONDENT: Mr EB

9^TH RESPONDENT: AS Pty Limited

10^TH RESPONDENT: Mr YY

11^TH RESPONDENT: Ms YY

12^TH RESPONDENT: Mr W Sanders

13^TH RESPONDENT: Mr G Sanders

FILE NUMBER: SYC 8576 of 2007

DATE DELIVERED: 25 March 2014

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATES: 4 and 5 June 2013, 22 October 2013, and 11 and 12 February 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Othen

SOLICITOR FOR THE APPLICANT: Paul & Paul

COUNSEL FOR THE 1^ST RESPONDENT: In Person

COUNSEL FOR THE 2^ND RESPONDENT: In Person

COUNSEL FOR THE 3^RD RESPONDENT: In Person

COUNSEL FOR THE 4^TH RESPONDENT: Mr Loewenstein

COUNSEL FOR THE 5^TH RESPONDENT: No Appearance

COUNSEL FOR THE 6^TH RESPONDENT: No Appearance

COUNSEL FOR THE 7^TH RESPONDENT: No Appearance

COUNSEL FOR THE 8^TH RESPONDENT: No Appearance

COUNSEL FOR THE 9^TH RESPONDENT: No Appearance

COUNSEL FOR THE 10^TH RESPONDENT: Mr Loewenstein

COUNSEL FOR THE 11^TH RESPONDENT: Mr Loewenstein

COUNSEL FOR THE 12^TH RESPONDENT: In Person

COUNSEL FOR THE 13^TH RESPONDENT: In Person

ORDERS

IT IS ORDERED

1. That the wife’s application for leave to amend her application filed 29 April 2013 is dismissed.

2. That the wife’s application for an adjournment pursuant to section 57 of the Legal Aid Commission Act 1979 (NSW) is dismissed.

3. That the wife’s application for spousal maintenance is dismissed.

4. That the wife’s application for orders pursuant to section 79 of the Family Law Act1975 (Cth) (“the Act”) is dismissed.

5. That the husband’s application for orders pursuant to section 79 of the Act is dismissed.

6. That the wife’s application for costs against the husband and the 4^th, 10^th and 11^th Respondents is dismissed.

7. That the husband’s application for costs against the wife is dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Sanders & Sanders and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 8576 of 2007

Ms Sanders

Applicant

And

Mr Sanders

1^st Respondent

And

U Pty Limited

2^nd Respondent

And

CG Pty Limited

3^rd Respondent

And

S Pty Limited

4^th Respondent

And

K Pty Limited

5^th Respondent

And

Y Pty Limited

6^th Respondent

And

N Holdings Pty Limited

7^th Respondent

And

Mr EB

8^th Respondent

And

AS Pty Limited

9^th Respondent

And

Mr YY

10^th Respondent

And

Ms YY

11^th Respondent

And

Mr W Sanders

12^th Respondent

And

Mr G Sanders

13^th Respondent

REASONS FOR JUDGMENT

THE PROCEEDINGS

1.Before the Court is an application for property settlement by Ms Sanders (“the wife”) arising out of her marriage to Mr Sanders (“the husband”).

2.The respondents to the application, at the commencement of the hearing, were :

·The husband and the corporate entities associated with the husband and the wife namely Y Pty Ltd; U Pty Ltd and N Holdings Pty Ltd;

·Mr EB and his corporate entity AS Pty Ltd;

·The corporate entities associated with the parties’ two sons, K Pty Ltd and CG Pty Ltd;

·Mr and Ms YY and their corporate entity S Pty Ltd.

The third party respondents had been associated with the husband and the wife and later the husband in a business partnership where the partners were their respective family trusts. The corporate entities set out above are the trustees of the respective trusts.

3.Ms YY is a named respondent but did not take any part in the proceedings until 22 October 2013.

4.Mr EB did not appear and has taken no part in the proceedings and neither has his corporate vehicle, AS Pty Ltd. There is no evidence of any attempted service on Mr EB or AS Pty Ltd.

5.The matter comes before the Court now by way of re-hearing following an appeal to the Full Court. The history of the matter, up to the date of the hearing of the Appeal, is set out in the judgment of the Full Court delivered on 29 August 2012 and is reproduced here. The history is not controversial. The Full Court recorded:

4.The original proceedings that gave rise to the appeal commenced when the husband started proceedings on 13 December 2007. The hearing of that application took place in May 2009 before Judicial Registrar Loughnan (as he then was). The wife applied for a review of the decision and, ultimately, in November 2010, the matter came before Cleary J for hearing.  Her Honour determined the matter on 18 November 2011. The wife appeals against her Honour’s determination.

5.Before the Judicial Registrar the husband sought orders in respect of the properties of the parties. In short, his Honour made various orders, including an order that the former matrimonial home ... be sold. He provided for various costs and liabilities to be paid from the proceeds and after that had occurred, the wife was to receive 77 per cent of the remaining balance and the husband was to receive the remainder. The Judicial Registrar also made an order for spousal maintenance to be paid by the husband, which varied a previous order by reducing the amount payable to the wife to $357 per week, but to cease on 29 November 2009. Further orders were made by the Judicial Registrar, including an order providing for each of the parties to retain assets then in their possession.

6.When the [former matrimonial home] was sold, a debt of $1.475 million owed by the partnership and secured over that property was discharged.

7.Again in summary, the Judicial Registrar made orders requiring the wife to transfer her shareholding in various corporate entities and trusts to the husband, to disclaim any interest in three trusts, and to assign any interest in loan accounts in the trusts to the husband.  Although the orders in relation to the sale of the house and payment of the net proceeds were put into effect to the wife’s benefit, by the time the matter came before Cleary J, the wife had not complied with the orders in relation to the corporate entities and the trusts.

8.In her application to review the orders of the Judicial Registrar before Cleary J, the wife asserted various errors, including errors of fact in findings about the value of an insurance policy and, more particularly, in findings about the value of a trust which she asserted was worth significantly more than the Judicial Registrar had found.  She also asserted the Judicial Registrar erred in failing to have regard to the fact that a liability to be repaid would have a benefit to the husband.

9.She asserted that these failures resulted in her receiving, by way of s 75(2) factors, an insufficient amount, and that, if she was right about the value of assets, then the asset pool as well would need to be adjusted. The husband for his part sought an order that the wife refund an extra $30,000 that she had received on sale of the parties’ house, and also sought an adjustment in the percentage entitlements found by the Judicial Registrar.

10.By the time the matter had come before Cleary J, however, a number of intervening events had occurred in relation to the business, and, accordingly, the wife significantly amended her application.

11.At all material times the husband had operated [a] business trading as [NE Group] in partnership, first with [Mr A] and later with other partners.

12.On 1 September 2010 new arrangements for [NE Group] took effect in which the husband transferred his interest in the partnership to his two sons. The wife sought to set aside this transaction pursuant to s 106B of the Family Law Act 1975 (Cth) (“the Act”) and she sought consequential orders relating to the transfers. She joined ten further respondents, being related entities and individuals. Her claim was that she should be paid a sum of $2.5 million by the [Sanders] Family Trust and take control of the business. She sought a raft of other orders which are not necessary to consider here. She also sought spousal maintenance from 5 November 2009 of $1,340 per week, less other payments she was receiving.

13.Although the wife was dissatisfied with the orders of the Judicial Registrar, through a series of defaults and delays, a valid application for a review of his decision was not filed until April 2010. As a result, the orders of the Judicial Registrar remained undisturbed.

14.Justice Cleary heard the matter over a period of eight days. Her Honour identified at [97] of her reasons the issues for hearing as follows:

1. Should the disposition of the husband’s interests in the business be set aside? [s 106B]

2. Was there a failure by the husband to make full and frank disclosure?

3. How should the net asset pool as determined be divided [s 79; s 75(2)]. [This includes the issue of valuation of the business and The [Sanders] Family Trust].

4. Should the husband continue to pay spouse maintenance and if so, how much and for what period.

5. How should the payment of $30,000 by the husband in July 2010 be categorised?

15.Her Honour dismissed the wife’s application, finding against her on all the relevant issues. Issues of credit played a part, her Honour finding that the husband’s evidence and that of his witnesses was more reliable than that of the wife. She also dismissed the husband’s application.

6.The Appeal was upheld.

7.In an effort to re-exercise the Trial Judge’s discretion and save the parties the cost of a re-hearing, the Full Court, at the conclusion of the hearing of the Appeal, made orders for the preparation of a report by a Single Expert, Mr E, in the following terms:

(2)That, by consent, further expert evidence in the proceedings be given by a single expert, [Mr E], chartered account [sic] (“the single expert”).

(3)That the single expert report on the interests of the husband and wife as at 31 August 2010 and 30 June 2012 in:

(a)[NPA] (“the partnership”);

(b)[Sanders A] Family Trust;

(c)[Sanders] Family Trust; and

(d)[Sanders] Family Trust ([I]).

(4)That in carrying out the exercise in Order (3), the single expert consider and, if appropriate, take account of:

(a)the effect of the discharge by the husband and wife of the NAB loans secured over the [former matrimonial home] in the sum of $1,457,000; and

(b)in particular whether that discharge gives rise to a debt owed by the partnership to the husband and wife, and, if so, in what proportions.

(5)That, if the single expert concludes that the value of the partnership and other entities is a net deficit, he report on the capacity of the partners, jointly and severally, to meet the liabilities of the partnership, including any monies owed to the husband and wife.

8.None of the respondents was legally represented in the hearing of the Appeal.

9.Ultimately, although the respondents urged the Full Court to re-exercise the discretion, the wife did not concede that Mr E’s report could be received into evidence without the need for cross-examination and/or further evidence to be heard, and, therefore, the Full Court could not re-exercise the discretion. The matter was remitted by the Full Court for re-hearing before me.

EVENTS LEADING UP TO THE RE-HEARING

10.On 15 May 2012 the real property owned by N Holdings Pty Ltd was sold by mortgagee sale.

11.After the judgment of the Full Court was delivered, U Pty Ltd transferred its interest in NPA to M Company, a company in which S Pty Ltd held 24 per cent of the shares and K Pty Ltd and CG Pty Ltd each held 38 per cent of the shares. Counsel for the wife properly conceded that the transaction was no more than a change of name of the holding entity.

12.On 8 April 2013 an application was made for the voluntary deregistration of N Holdings Pty Ltd.

13.On 23 April 2013 a resolution was passed for the voluntary winding up of M Company and a liquidator was appointed. 

14.On 2 May 2013 applications were made for the voluntary deregistration of Y Pty Ltd, CG Pty Ltd and K Pty Ltd.

15.In the course of a Directions Hearing on 19 April 2013, the husband told the Court that U Pty Ltd, N Holdings Pty Ltd and Y Pty Ltd were in the process of liquidation. He was ordered to provide to the wife’s solicitors any Financial Statements provided by the liquidators in respect of the corporate entities.

16.In the course of a readiness hearing on 14 May 2013, the wife’s solicitors were advised that CG Pty Ltd and K Pty Ltd were also to be liquidated. The wife’s solicitors were given copies of all the documents then held by the respondents in relation to the liquidation of those entities. Mr YY told the Court that S Pty Ltd was also in the process of liquidation.

17.Thus by 14 May 2013 it was apparent that it was unlikely that U Pty Ltd, N Holdings Pty Ltd, Y Pty Ltd, CG Pty LTd, K Pty Ltd or S Pty Ltd had net assets of any substance.

18.On 14 May 2013, the wife was directed to file a minute of the orders she sought and a direction was made that all of the material to be relied upon by the wife was to be filed by 24 May 2013. The solicitor for the wife told the Court that she was proceeding on her Amended Application in a Case filed on 29 April 2013 which sought orders pursuant to section 79 of the Family Law Act 1975 (Cth) (“the Act”). Mr EB did not appear and has not been served with the Amended Application in a Case. There was no appearance on behalf of AS Pty Ltd and no Affidavit of Service upon AS Pty Ltd was tendered.

19.On 14 May 2013 the wife applied to have her two adult sons, Mr G Sanders and Mr W Sanders, joined as parties to the proceedings. She had previously sought orders against corporate entities controlled by them but by this application also sought orders against them in their personal capacities. Over their objections, they were joined as respondents.

20.At all times before me, until 22 October 2013, the respondents have represented themselves. On 22 October 2013 and thereafter, Mr YY, Ms YY and S Pty Ltd were represented by Counsel.

THE RE-HEARING ON 14 JUNE 2013

21.

When the re-hearing commenced on 4 June 2013 the report of the Single Expert was admitted into evidence and Mr E was not required for

cross-examination. It will be recalled that the possibility of challenge to Mr E’s evidence was the only reason that the Full Court was unable to re-exercise the discretion and bring these proceedings to an end.

22.On the re-hearing, the wife, in her Amended Application in a Case filed 29 April 2013, sought orders against the now 13 respondents in the following terms:

1.That the court review the decision of the Judicial Registrar Loughnan made 29 May 2009 and make the follow orders in lieu of the Orders made by the Judicial Registrar:

1.1A Declaration that each of [CG Pty Ltd] in its capacity as trustee of the [F Trust], [S Pty Ltd] in its capacity as trustee of the [YY] Family Trust; and [K Pty Ltd] in its capacity as trustee of the [J] Trust hold their respective units and other interests in [U Pty Ltd] upon trust for [Y Pty Ltd] in its capacity as trustee of the [Sanders] Family Trust and [S Pty Ltd] in its capacity as trustee of the [YY] Family Trust for their respective rights and interests.

1.2A declaration that [U Pty Ltd] holds its interest in the business and undertakings of the entity trading as [NE] Group (“the Partnership”) upon trust for [Y Pty Ltd] and [S Pty Ltd] in their respective capacities as aforesaid.

1.3Pursuant to Section 106B of the Act, that each of [CG Pty Ltd], [S Pty Ltd] and [K Pty Ltd] do forthwith all acts and things, execute all documents necessary to put into effect and implement the transfer to [Y Pty Ltd] and [S Pty Ltd] of their respective interests in and to the Units held by them and other entitlements in relation to [U Pty Ltd].

1.4That [U Pty Ltd] in its capacity as aforesaid do forthwith all acts and things and execute all documents as may be necessary including the giving of all consents and registration of transfers of all Units so as to implement the preceding order.

1.5That the husband and wife do forthwith make a formal demand against the partnership conducted by [Y Pty Ltd], [S Pty Ltd] and [AS Pty Ltd] in its capacity as trustee of the [YY] Family Trust against all persons or entities who received or guaranteed advances by National Australia Bank to [NE] Group, for the payment of such sums as may be owed by the partnership to the husband and the wife in these proceedings (“the loan accounts”).

1.6That the interest of the husband in the said loan accounts is hereby vested in and transferred to the wife and that the husband do forthwith all acts and things and execute all and any documents necessary to give effect to this Order.

1.7That for the purpose of implementation of the foregoing Orders and the succeeding Orders that the husband do forthwith do all acts and things and execute all documents as may be necessary so as to appoint the wife as successor appointor to the [Sanders] Family Trust and to the [Sanders A] Family Trust.

1.8Pursuant to section 79 that [Y Pty Ltd], [S Pty Ltd] and [AS Pty Ltd] together with the husband, [Mr EB], [Ms YY], [Mr YY], [Mr G Sanders] and [Mr W Sanders] do jointly and severally forthwith pay to the wife all monies which were paid to the National Australia Bank in reduction of the facilities granted to [NE] Group by the bank in respect of accounts numbered …44 and …21 and …43 in the sum of $1,457,000 together with interest at the respective rates last charged by the National Australia Bank to [NE] Group in respect of such loans computed from the date of the payment to the National Australia Bank by the husband and wife to the date of payment.

1.9Pursuant to sections 79 and 85A of the Act, that [Y Pty Ltd] in its capacity as Trustee of the [Sanders] Family Trust do pay to the Applicant Wife the sum of $68,979.

1.10Pursuant to sections 79 and 85A of the Act, that [N Holdings Pty Ltd] in its capacity as Trustee of the [Sanders A] Family Trust do all acts and things so as to pay to the wife the proceeds of sale of the property lots [1] and [2] at [R Street, Suburb LL] together with the 2 shares in [BB Company] Pty Ltd (‘the property’).

1.11Pursuant to section 79 that [Mr EB] and/or [Mr YY] and/or [Ms YY] and/or [AS Pty Ltd] do jointly and severally forthwith pay to [N Holdings Pty Ltd] in its said capacity, the sums found to be due to the company and/or National Australia Bank Limited by [Mr EB] and/or [Mr YY] and/or [Ms YY] and/or [AS Pty Ltd] to [N Holdings Pty Ltd] and in particular, all monies secured against the property including all costs and accrued interest.

1.12That the Respondent Husband do pay to the Applicant Wife by way of spousal maintenance with effect as from 5 November 2009 in the sum of $1,340 per week and that he do pay the arrears as at the date of these orders within 14 days.

1.13That pursuant to Section 106A(1) that the Registrar is hereby appointed to execute any necessary Deed or instrument in the name or place of any party ordered to do such a thing by these Orders.

1.14That each party have liberty to apply in relation to the implementation of these orders on 48 hours notice to each other and to the court.

1.15That any party opposing these orders pay to the Applicant Wife such of her costs of the proceedings as give rise to such orders on a joint and several basis including the costs of the proceedings for an extension of time within which to file her Application for Review of the decision of the Judicial Registrar heard by the Honourable Justice Cohen on an indemnity basis.

1.16Pursuant to Rule 19.18(1)(a) and (b) that such costs be paid in the amount assessed as fair and reasonable costs as between party and party on application by the Wife to the Manager Costs Assessment of the Supreme Court of NSW in accordance with the Legal Profession Act 2004 such costs to be assessed without reference to the scale provided for in Schedule 3 to the Family Law Rules which scale is to be disregarded completely for the purpose of the assessment having regard to the costs reasonably and actually incurred by the Wife in the proceedings in accordance with her retainer agreement with her solicitors.

1.17And by way of implementation of the foregoing:

1.17.1That the Husband do forthwith cause [Y Pty Ltd] pay to the Wife the sum of $75,593 and to debit that sum to the loan account of the Husband and to make a corpus distribution to himself out of the [Sanders] Family Trust of $24,546 and that within 28 days of the date of these orders he do pay to the Wife the further sum of $24,546.

1.17.2The Husband and in default of compliance by him then [U Pty Ltd], [Mr YY], [Ms YY], [S Pty Ltd], [Mr EB], [AS Pty Ltd], [K Pty Ltd], [CG Pty Ltd], [Mr G Sanders] and [Mr W Sanders] (“the Respondent parties”) do jointly and severally pay to the Wife the total sum of $1,624,807 (“the settlement sum”) as to $500,000 within 28 days and the balance by instalments of $20,000 per month until paid in full.

1.17.3That pursuant to section 117B(2) the Husband and the Respondent parties pay interest to the Wife at the rate of 9% per annum computed from the date of these orders upon the balance of the settlement sum outstanding from time to time on monthly rests until payment to her of the respective sums payable pursuant to Orders 3 and 4 hereof.

1.17.4That until payment in full to the wife of the sum payable to her pursuant to Order number 1 that the Husband do pay to the Wife $2,000 per week as from 29 November 2009 by way of spouse maintenance provided that the obligations of the Husband hereunder may be reduced by the amount of any payments made to her of the periodic sums by [N Holdings Pty Ltd] pending compliance with Order number 1.

1.17.5That the Order for spouse maintenance payable by the Husband shall cease upon compliance by the Husband and the Respondent parties with the whole of their obligations under these Orders.

1.17.6That the Husband do pay to the Wife within 28 days of the date of these orders all arrears of spousal maintenance under Order number 3.1 of the Orders made on 29 May 2009 ("the Orders") and that he do pay the arrears of Order number 6 hereof within three (3) months.

1.17.7If Order 12 is not made that the Order for spousal maintenance made on 29 May 2009 be varied by deleting therefrom the words “those payments continue until only 29 November 2009” and that the Husband do pay to the Wife on account of the arrears the sum of $243 per week.

1.17.8Upon compliance by the Husband and the Respondent parties with their obligations under these orders that Orders 2.4 and 2.5 and declarations 2.6, 2.7 and 2.8 of the Orders have effect.

1.17.9That the Husband and the Respondent parties do jointly and severally indemnify the Wife from and in respect of all liabilities of the Wife to National Australia Bank Limited ("the Bank") in respect of any guarantee given by her in respect of the liabilities of [NPA] to the Bank.

1.17.10That the Husband do and the Respondent parties do jointly and severally indemnify the Wife from and in respect of any liability to the [Sanders] Family Trust; the [Sanders] Family Trust ([I]); the [Sanders A] Family; [NPA]; and/or [Y Pty Ltd] and/or [N Holdings Pty Ltd].

1.17.11That the Husband do within 28 days of the date of these orders pay the costs of the Wife of the proceedings for leave to extend the time for filing her application for review of the Orders of Loughnan JR made 29 May 2009 (“the Leave Application”) on an indemnity basis and that such costs be assessed in the sum of $19,791.75.

1.17.12If Order 9 is not made on an indemnity basis or in the amount sought that the Husband do pay the Wife’s costs of the Leave Application and that pursuant to Rule 19.18(1)(a) and (b) that such costs be paid in the amount assessed as fair and reasonable costs as between party and party on application by the Wife to the Manager Costs Assessment of the Supreme Court of NSW in accordance with the Legal Profession Act 2004 such costs to be assessed without reference to the scale provided for in Schedule 3 to the Family Law Rules which scale is to be disregarded completely for the purpose of the assessment having regard to the costs reasonably and actually incurred by the Wife in the proceedings in accordance with her retainer agreement with her solicitors.

1.17.13That the Husband and the other Respondent parties do jointly and severally pay the costs of the Wife of and incidental to these proceedings being the costs incurred by the Wife as and from6 October 2010 and that pursuant to Rule 19.18(1)(a) and (b) that such costs be paid in the amount assessed as fair and reasonable costs as between party and party on application by the Wife to the Manager Costs Assessment of the Supreme Court of NSW in accordance with the Legal Profession Act 2004 such costs to be assessed without reference to the scale provided for in Schedule 3 to the Family Law Rules which scale is to be disregarded completely for the purpose of the assessment having regard to the costs reasonably and actually incurred by the Wife in the proceedings in accordance with her retainer agreement with her solicitors.

1.17.14That pursuant to Section 106A(1) that the Registrar is hereby appointed to execute any necessary Deed or instrument in the name or place of any party ordered to do such a thing by these Orders.

1.17.15Liberty to apply in relation to the implementation of these Orders on 48 hours notice.

2.That the Respondent parties comprising of the Husband and each of the second to thirteenth respondents pay to the wife by way of interim costs and by way of interim property settlement the sum of thirty thousand dollars within 7 days.

3.That until further order the husband to pay the wife by way of interim maintenance the sum of five hundred dollar $500 per week.

4.To the extent the leave is required that the wife have leave to amend her Application for Review in these proceedings in accordance with the documents filed this day.

23.The respondents had prepared the matter for hearing on the basis of the application filed 29 April 2013 as set out above.

24.On the first day of the re-hearing on 4 June 2013, the final reports of the liquidator were available. Those reports established that there was no surplus of assets over liabilities in any of the corporate entities controlled by the husband, Mr G Sanders or Mr W Sanders.

25.Having considered the material now available from the liquidator, the wife discontinued the proceedings against U Pty Ltd, CG Pty Ltd, K Pty Ltd, Y Pty Ltd, N Holdings Pty Ltd, Mr G Sanders and Mr W Sanders.

26.Orders were made accordingly.

THE WIFE’S APPLICATION FOR LEAVE TO AMEND

27.Counsel for the wife then told the Court that, by way of a proposed amended application, she sought to proceed against Mr and Ms YY on a claim based on the equitable doctrine of contribution from a guarantor. The applicant would rely, if leave were granted, on the accrued jurisdiction of the Court.

28.Clause 1.8 of the Application in a Case, for ease of understanding, is set out again below: 

1.8Pursuant to section 79 that [Y Pty Ltd], [S Pty Ltd] and [AS Pty Ltd] together with the husband, [Mr EB], [Ms YY], [Mr YY], [Mr G Sanders] and [Mr W Sanders] do jointly and severally forthwith pay to the wife all monies which were paid to the National Australia Bank in reduction of the facilities granted to [NE] Group by the bank in respect of accounts numbered …44 and …21 and …43 in the sum of $1,457,000 together with interest at the respective rates last charged by the National Australia Bank to [NE] Group in respect of such loans computed from the date of the payment to the National Australia Bank by the husband and wife to the date of payment.

29.Counsel for the wife conceded that the application enunciated in Clause 1.8, is an application for the exercise of power pursuant to s 79 of the Act. Counsel for the wife conceded that, if the Court were to entertain the proposed amended application for the relief that the wife now sought against Mr and Ms YY, it could only do so pursuant to accrued jurisdiction and that the order could not be made pursuant to s 79.

30.Counsel for the wife submitted, in relation to the requirement for leave to be granted to amend, that adequate notice of the application had been given to Mr and Ms YY by the terms of Clause 1.8 of the Amended Application of 29 April 2013. I reject the submission that Mr YY, representing himself and with no legal training, could have interpreted Clause 1.8 as seeking an order against only him and his wife for contribution on a personal guarantee pursuant to equitable principles, relying on accrued jurisdiction.

31.That claim for equitable relief had never before been enunciated on behalf of the wife. The personal guarantee, said to support the claim for equitable relief, had been executed by Mr and Ms YY and other third party guarantors on 13 February 2007, prior to the hearing before Judicial Registrar Loughnan (as he then was) in 2009. 

32.The parties to the proceedings before the Judicial Registrar were the husband and the wife. No relief was sought against Mr and Ms YY although it must have been apparent to those representing the wife that the whole of the guaranteed sum would be paid out of the proceeds of sale of the matrimonial home, giving rise to the equitable claim against the other guarantors. The wife was represented in those proceedings by her current solicitors and by Counsel. Judgment was delivered on 29 May 2009 and the orders provided, inter alia, for the sale of the home. The matrimonial home was sold, settlement taking place on 9 July 2010 and the debt to the bank was repaid entirely from the assets of the husband and the wife.

33.In the proceedings before Cleary J, Mr and Ms YY and S Pty Ltd were respondents. The wife was represented by her current solicitors and by Senior Counsel. The orders sought by the wife in those proceedings were:

1.A Declaration that each of [CG Pty Ltd] in its capacity as trustee of the [F Trust], [S Pty Ltd] in its capacity as trustee of the [YY] Family Trust; and [K Pty Ltd] in its capacity as trustee of the [J] Trust hold their respective units and other interests in [U Pty Ltd] upon trust for [Y Pty Ltd] in its capacity as trustee of the [Sanders] Family Trust and [S Pty Ltd] in its capacity as trustee of the [YY] Family Trust for their respective rights and interests.

2.A declaration that [U Pty Ltd] holds its interest in the business and undertakings of the entity trading as [NE] Group (“the Partnership”) upon trust for [Y Pty Ltd] and [S Pty Ltd] in their respective capacities as aforesaid.

3.Pursuant to Section 106B of the Act, that each of [CG Pty Ltd], [S Pty Ltd] and [K Pty Ltd] do forthwith all acts and things, execute all documents necessary to put into effect and implement the transfer to [Y Pty Ltd] and [S Pty Ltd] of their respective interests in and to the Units held by them and other entitlements in relation to [U Pty Ltd].

4.[U Pty Ltd] in its capacity as aforesaid do forthwith all acts and things and execute all documents as may be necessary including the giving of all consents and registration of transfers of all Units so as to implement the preceding order.

5.That the husband and wife do forthwith make a formal demand against the partnership conducted by [Y Pty Ltd], [S Pty Ltd] and [AS Pty Ltd] in its capacity as trustee of the [EB] Family Trust against all persons or entities who received or guaranteed advances by National Australia Bank to [NE] Group, for the payment of such sums as may be owed by the partnership to the husband and the wife in these proceedings (“the loan accounts”).

6.That the interest of the husband in the said loan accounts is hereby vested in and transferred to the wife and that the husband do forthwith all acts and things and execute all and any documents necessary to give effect to this Order.

7.That for the purpose of implementation of the foregoing Orders and the succeeding Orders that the husband do forthwith do all acts and things and execute all documents as may be necessary so as to appoint the wife as successor appointor to the [Sanders] Family Trust and to the [Sanders A] Family Trust.

8.That [Y Pty Ltd], [S Pty Ltd] and [AS Pty Ltd] together with [Mr EB], [Ms YY] and [Mr YY] do forthwith pay to the husband and wife all monies which were paid to the National Australia Bank in reduction of the facilities granted to [NE] Group by the bank in respect of accounts numbered …44 and …21 and …43 together with interest at the respective rates last charged by the National Australia Bank to [NE] Group in respect of such loans computed from the date of the payment to the National Australia Bank by the husband and wife to the date of payment.

9.Pursuant to sections 79 and 85A of the Act, that [Y Pty Ltd] in its capacity as Trustee of the [Sanders] Family Trust do pay to the Applicant Wife the sum of $2,500,000.

10.Pursuant to sections 79 and 85A of the Act, that [N Holdings Pty Ltd] in its capacity as Trustee of the [Sanders A] Family Trust do all acts and things so as to cause the property at [R Street, Suburb LL] (“the property”) to be sold by public auction to be held as soon as practicable for the best price reasonably obtainable, and that the net proceeds of sale be paid to the Applicant Wife.

11.That [Mr EB] and/or [Mr YY] and/or [Ms YY] and/or [AS Pty Ltd] do forthwith pay to [N Holdongs Pty Ltd] in its said capacity, the sums found to be due by [Mr EB] and/or [Mr YY] and/or [Ms YY] and/or [AS Pty Ltd] to [N Holdings Pty Ltd] and in particular, all monies secured against the property including all costs and accrued interest.

12.That the Respondent Husband do pay to the Applicant Wife by way of spousal maintenance with effect as from 5 November 2009 in the sum of $1340 per week less any payments received from [N Holdings Pty Ltd] pursuant to the succeeding order and that he do pay the arrears as at the date of these orders within 14 days.

13.By way of implementation of the preceding order that [N Pty Ltd] do pay to Applicant Wife as and when same are received, and until compliance with Order No. 4, the gross rental payments received in respect of the property commencing forthwith.

14.That pursuant to Section 106A(1) that the Registrar is hereby appointed to execute any necessary Deed or instrument in the name or place of any party ordered to do such a thing by these Orders.

15.That each party have liberty to apply in relation to the implementation of these orders on 48 hours notice to each other and to the court.

16.That any party opposing these orders pay to the Applicant Wife such of her costs of the proceedings as give rise to such orders on a joint and several basis.

17.Pursuant to Rule 19.18(1)(a) and (b) that such costs be paid in the amount assessed as fair and reasonable costs as between party and party on application by the Wife to the Manager Costs Assessment of the Supreme Court of NSW in accordance with the Legal Profession Act 2004 such costs to be assessed without reference to the scale provided for in Schedule 3 to the Family Law Rules which scale is to be disregarded completely for the purpose of the assessment having regard to the costs reasonably and actually incurred by the Wife in the proceedings in accordance with her retainer agreement with her solicitors.

34.No order was sought against Mr and Ms YY for equitable relief in the exercise of the accrued jurisdiction of the Court. Accrued jurisdiction was not argued before Cleary J.

35.By the time of the hearing before Cleary J, the right of the husband and the wife to claim for equitable relief was clear. The debt of the business had been discharged entirely from the funds of the husband and the wife with no contribution from the other guarantors.

36.Mr and Ms YY were parties to the proceedings. The application could have been made. It was not.

THE PROPOSED AMENDED APPLICATION

37.On 4 June 2013 the wife provided the Court and the respondents with a proposed Minute of Orders which would constitute the amendment to her application, marked as Exhibit 7, in the following terms:

1.[Mr YY]and [Ms YY] as co-guarantors of the husband and the wife are jointly and severally obliged to reimburse the husband and the wife the sum of $435,000 being the sum which is in excess of 70% of the debt of $1,457,000 to the Commonwealth Bank of Australia paid out by the husband and the wife on 9 July 2010.

2.[Mr YY] and [Ms YY] shall pay or cause to be paid to the husband and the wife the sum of $435,000 within 56 days of the date of the making of these Orders.

3.By way of property adjustment under section 79 the wife is entitled to 70% and the husband is entitled to 30% of all sums received pursuant to order 2.

4.In default of payment by the due date stated in order 2 then the property at [FF Street, Suburb CC] in the State of New South Wales shall be sold forthwith by public auction for the best price reasonably obtainable and the proceeds shall be paid out in the following order and priority:

a.To meet the trustee’s costs;

b.To meet the costs of sale and conveyancing deductions;

c.To pay out all monies secured by way of mortgage over the said property;

d.To pay the husband and the wife the amount due under order 2, in the proportions ordered at order 3;

e.To [Mr YY] and [Ms YY] any balance remaining.

5.Pending compliance with order 2, [Mr YY] and [Ms YY] are hereby restrained by injunction from doing any act or thing to sell, transfer, assign, encumber, further encumber or otherwise deal with or alienate their respective interests in the property situated at and known as [FF Street, Suburb CC] in the State of New South Wales, except in accordance with these Orders.

6.The husband and the wife are each otherwise declared to be solely entitled to all assets in their respective names, ownership possession or control, as against the other.

7.Each of the husband and the wife is otherwise responsible, as against the other, for their own respective debts to third parties and each indemnifies the other in respect thereof.

8.That by way of spouse maintenance the husband shall pay to the wife the sum of $250 per week until she attains the age of 60 years.

9.All parties shall do all acts and things and sign all documents necessary to give effect to these Orders and in default, the Registrar of the Court is hereby appointed pursuant to section 106A of the Family Law Act 1975 to sign any document any party has failed or neglected to sign.

10.Costs.

38.The property at FF Street, Suburb CC is the matrimonial home of Mr and Ms YY.

39.Mr YY was in Court. Ms YY was not. She had no notice of the proposed amendment. The matter was adjourned to the following day to allow for Ms YY to be served and for the respondents to consider their positions.

40.On the following day, Ms YY did not appear but acknowledged that she had been served with the amending Minute of Orders and, in writing, authorised Mr YY to appear on her behalf. While her document was sufficient evidence that she had knowledge of the proposed amendment, it could not authorise Mr YY to appear on her behalf as he is not a legal practitioner. Mr YY indicated that he wished to seek legal advice in relation to the proposed amendment.

41.The wife was directed to file an Application for Leave to Amend and to file and serve written submissions in support of that application.

42.Directions were made that the application for leave to amend should be heard and determined before the substantive application proceeded further. The hearing resumed on 22 October 2013.

43.Both Mr and Ms YY swore affidavits. They were not required for cross-examination.

44.The application for leave to amend was refused and I indicated that reasons would be provided in the judgment in the substantive proceedings. The reasons follow.

THE APPLICATION FOR LEAVE TO AMEND

45.Leave to amend an application is not automatic.

46.The Full Court most recently considered the law in relation to leave to amend in Sexton & Sexton [2012] FamCAFC 218 where their Honours said:

46. Both senior counsel for the husband and counsel for the wife drew attention to the decision in Aon Risk Services Australia Ltd v Australian National University. In that decision his Honour Chief Justice French said:

In the proper exercise of primary judge’s discretion, the applications for adjournment and amendment were not to be considered solely by reference to whether any prejudice to Aon could be compensated by costs. Both the primary judge and the Court of Appeal should have taken into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system. Given its nature, the circumstances in which it was sought, and the lack of a satisfactory explanation for seeking it, the amendment to ANU’s statement of claim should not have been allowed. The discretion of the primary judge miscarried.

47.Again in [30], his Honour said:

It might be thought a truism that “case management principles” should not supplant the objective of doing justice between the parties according to law. Accepting that proposition, JL Holdings cannot be taken as authority for the view that waste of public resources and undue delay, with the concomitant strain and uncertainty imposed on litigants, should not be taken into account in the exercise of interlocutory discretions of the kind conferred by r 502. Also to be considered is the potential for loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification, whether they be for adjournment, for amendments giving rise to adjournment, or for vacation of fixed trial dates resulting in the resetting of interlocutory processes.

48.The majority of the Court (Gummow, Hayne, Crennan, Kiefel and Bell JJ) came to the same conclusion as the Chief Justice. Their Honours said:

… The modern view is that even an order for indemnity costs may not always undo the prejudice a party suffers by late amendment.

…

… Rule 21 makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court’s discretion. Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment.

49.Their Honours also said:

An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. …

50.…

51.It was submitted that an order for costs would compensate the wife for any delay. However, to adopt the words used by the majority in Aon Risk Services Australia Ltd v Australian National University, there is no entitlement for a party to amend a pleading on the basis that a party can raise an arguable claim, subject only to payment of costs by way of compensation.  The Court must weigh all matters relevant to the exercise of the power to permit amendment, such as substantial delay, wasted costs and concerns of case management. “It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs.” Such an order “may not always undo the prejudice a party suffers by late amendment.” … (footnotes omitted)

47.Considering firstly the delay on the part of the wife in bringing her equitable claim: No attempt has been made to provide an adequate or, indeed, any explanation for the delay.

48.The equitable claim could have been raised before Cleary J.

49.The claim was raised, on the first day of the re- hearing before me on 4 June 2013 , after orders had been made that any material (including her Amended Application in a Case or Minute of Orders sought) to be relied upon by the wife was to be filed by close of business on 24 May 2013.

50.The equitable claim was not foreshadowed in the hearing of the Appeal before the Full Court. It would have been open to the wife to raise her intention to bring a claim in equity, relying on accrued jurisdiction, in relation to the issue of whether it was appropriate for the Full Court to re-exercise the discretion.

51.To the contrary, the wife agreed that it would have been appropriate for the Full Court to re-exercise the discretion, but for the fact that she might wish to challenge Mr E’s evidence.  Implicit in that position is a concession that there were no matters relevant to the exercise of discretion that had not been canvassed.

52.The prejudice to Mr and Ms YY is self-evident. They have been involved in this litigation since at least 5 November 2010 when the wife filed an Amended Response naming them as parties. They participated in the proceedings before Cleary J on 17-18 November 2010, 28 February 2011, 1-4 March 2011 and 28 March 2011. They were respondents to the Appeal in the Full Court and have participated in the proceedings before me. Mr YY has told the Court on numerous occasions that he acts for himself because he cannot afford legal representation. That assertion has not been challenged before me and I accept it.

53.In an affidavit sworn 3 May 2013 Mr YY says: “Having suffered a serious ongoing health issue I relinquished my directorship of the business,” and further: “as a result of the liquidation I no longer have shares or ownership in any business, and am without employment and have sustained a capital loss of $526,000.”

54.The Financial Statement sworn by Mr YY on 3 May 2013 deposes that he has no income from employment and that he is supported by his wife who earns $3,849 per week. He gives evidence of fixed costs being a mortgage payment to the National Australia Bank (“NAB”) of $300 per week, rates of $50 per week, and repayments of business loans to NAB of $151 per week.

55.In his affidavit sworn 18 October 2013 he deposes to being under ongoing psychological care.

56.In her affidavit sworn 18 October 2013, Ms YY deposes to having found Mr YY near death on 29 January 2013 after he attempted suicide.

57.Mr and Ms YY own a home with an estimated value of $730,000 and have outstanding liabilities of some $625,000. Mr YY deposed to business losses arising from the venture which is the subject of this litigation, of $528,000. Mr and Ms YY, through their family trust of which S Pty Ltd is the trustee, had paid $515,000 for their interest in the venture. Their entities, at the time the guarantee was signed, held a 15 per cent share.

58.In her affidavit, Ms YY deposes to substantial risk to her employment if she should become bankrupt due to the industry she is employed in.

59.Mr E, in his single expert report, states that Mr YY has no capacity to borrow. Ms YY may have the capacity to service a loan but has little to offer as security.

60.In the present case, where the respondents represent themselves, there can be no suggestion that any order for costs could be made to compensate them.

61.The wife may have an arguable case against Mr and Ms YY (and this aspect will be discussed later in these reasons) but it is difficult to see how any order made in her favour could ever be met.

62.The proceedings between the husband and the wife have already been heard twice. The hearing before Judicial Registrar Loughnan (as he then was) took two days. There were interlocutory applications before Cohen J and Cleary J in relation to the wife’s application to review, out of time, that decision. The proceedings before Cleary J took eight days and there were ten respondents, excluding the wife.

63.The matter was listed in the Full Court for the hearing of the Appeal, then, for an application relating to material to be forwarded to the Single Expert and, lastly, before the Full Court on 21 March 2013 to determine whether the discretion could be re-exercised. On that day the re-hearing dates were allocated and the matter was listed for three days commencing on 4 June 2013. Thus, this matter was given priority over other matters waiting in my docket for the allocation of hearing dates. Because the matter could not proceed, by reason of the late application for leave to amend, those three days were thrown away and substantial public resources have been wasted. But for the wife’s proposed amended application, the matter would have proceeded to conclusion in June.

64.The matter was mentioned on 1 July 2013 to determine what further evidence needed to be filed by the respondents in order to meet the Application for Leave to Amend. The matter was then given a hearing date of 22 October 2013.

65.The matters that are set out above are sufficient to conclude that there is an “irreparable element of unfair prejudice in delaying proceedings”, as held by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at [5].

66.Set against the prejudice to the respondents, the wife would argue that she is prejudiced by being refused leave to run her case, but that prejudice must be viewed in the light of the respondents’ financial ability to meet any order and the utility of making orders which are unlikely to be satisfied.

67.The orders sought by the wife are premised on Mr and Ms YY being liable to contribute 30 per cent of the guaranteed sum. Setting aside for the moment the factual dispute about whether their corporate entities ever had a 30 per cent interest in the partnership, or a 30 per cent shareholding in the relevant operating company, they were not the only personal guarantors.

68.The guarantee was executed on 13 February 2007. The guarantors were Mr EB, Mr YY, Ms YY, the husband, the wife and Y Pty Ltd, as Trustee for the Sanders Family Trust (I). All of the guarantors are jointly and severally liable.

69.Y Pty Ltd has been deregistered. Mr E values the assets of the Sanders Family Trust (I) at $10. Mr and Ms YY have a potential claim for contribution against Y Pty Ltd. Had the wife’s equitable claim been made at a time when the Sanders Family Trust (I) was trading, that claim of contribution may have had some value. They are thus further prejudiced by the lateness of the claim.

70.As O’Donovan and Phillips, the learned authors of The Modern Contract Of Guarantee (2^nd ed. 2010) explain at page 816:

Once it is clear that the defendant has no defence to the action for contribution, it becomes necessary to consider how the court calculates the amount of contribution which can be awarded to the claimant. While the common law judges ordered equal contributions from all the co-sureties whether they were solvent or insolvent, the equitable rule which now prevails requires all solvent sureties to divide the burden rateably and to contribute in proportion to the amounts for which they are respectively liable under the terms of their guarantees. This proportionate division of the principal debt among the solvent co-sureties can be varied or excluded by express agreement among the sureties. (Footnotes omitted)

71.And at pages 817-8 they explain:

The equitable mode of distributing the burden of surety-ship is for the solvent co-sureties to contribute equally if each is a guarantor to an equal amount, and if not equally, then proportionately to the amount for which each is liable. (Footnote omitted)

72.In the present case, each guarantor is a guarantor for the whole amount. Y Pty Ltd has been voluntarily de-registered. In the ordinary course of events this would indicate that Y Pty Ltd is solvent. Equity would require Y Pty Ltd to be joined. In order for that to happen, Y Pty Ltd would need to be re-registered. It will be recalled that after reading Mr E’s report, the wife discontinued the proceedings against Y Pty Ltd. Y Pty Ltd was the trustee of the Sanders Family Trust (I) which Mr E found to have assets of $10. Once re-registered, Y Pty LTd would have no capacity to pay any sum ordered.

73.O’Donovan and Phillips explain at page 818:

Where one of the guarantors is insolvent, the other guarantors’ share of the burden of the principal debt is proportionately increased.

74.More relevantly, Mr EB is a guarantor, as is AS Pty Ltd, and they are jointly and severally liable with Mr and Ms YY and S Pty Ltd. Mr EB is not a party to the proceedings, nor is AS Pty Ltd.  The proposed application is therefore defective because all of the available guarantors have not been joined. That is a further reason, if such were necessary, to refuse the wife’s application for leave to amend.

75.The principal borrowers, referred to in the Deed of Guarantee as the “Customer/s”, are Y Pty Ltd, S Pty Ltd and AS Pty Ltd. The first recourse of the husband and the wife in relation to monies paid pursuant to the guarantee is to the principal borrowers. They may each have been solvent at the time when the claim arose, and recourse could have been had to their assets, but Y Pty Ltd has been liquidated and AS Pty Ltd is not a party to the proceedings. There is no evidence before me of the net asset position of S Pty Ltd except that it is in liquidation.

76.The matters relevant to the exercise of the power to permit amendment include: substantial delay, wasted costs, prejudice and concerns of case management.

77.Given the nature of the application proposed by the wife, the circumstances in which it was sought to be filed, and the lack of a satisfactory explanation for the delay in raising the “contribution on the guarantee pursuant to equitable principles” claim, in circumstances where there were several opportunities during the litigation of these proceedings (as outlined earlier in these reasons) when this could have occurred, the wife’s Application for Leave to Amend should not be allowed.

THE WIFE’S S 79 APPLICATION

78.On 22 October 2013, the following notations, orders and directions were made:

IT IS NOTED

1.   That the wife wishes to proceed with orders 1.8, 1.12, 1.13, 1.14, 1.15 and 1.16 of her Application in a Case filed 29 April 2013.

IT IS DIRECTED

2.   That the 4^th, 10^th and 11^th respondents being Mr and [Ms YY] and [S Pty Ltd] file any response and cross claim within two weeks of this date.

3.   That the 4^th, 10^th and 11^th respondents file and serve any affidavit material upon which they seek to rely within four weeks of this date.

IT IS ORDERED

4.   That the matter is listed for callover before the Honourable Justice Rees on 13 December 2013 at 10 am with a view to fixing dates for the continuation of the hearing.

79.The matter was listed for callover on 13 December 2013. The wife was represented by her then solicitor. The 4^th, 10^th and 11^th Respondents (Mr and Ms YY and S Pty Ltd) were represented by Counsel. The husband had been excused attendance having told the Court that he would accept the earliest possible hearing dates.   Both legal representatives advised that all material had been filed and the matter was ready to proceed. The matter was listed for re-hearing on 11 and 12 February 2014.

80.In the balance of these reasons, Mr and Ms YY and S Pty Ltd are referred to as “the Respondents”.

81.The wife’s solicitor filed a Notice of Ceasing to Act on 7 February 2014.

THE WIFE’S APPLICATION FOR AN ADJOURNMENT PURSUANT TO SECTION 57 OF THE LEGAL AID COMMISSION ACT ON 11 FEBRUARY 2014

82.At the commencement of the hearing on 11 February 2014, the wife appeared unrepresented, as did the husband. The respondents were represented by Counsel.

83.The wife made an oral application for an adjournment pursuant to section 57 of the Legal Aid Commission Act 1979 (NSW).

84.The husband had been given no notice of the application and only became aware of it when Counsel for the Respondents told him about it on the morning of the hearing.

85.The Respondents had received notice on Friday 8 February 2014.

86.The wife said that she had applied for legal aid in 2013 (she could not be more specific) and that her application had been refused at the end of 2013 (again she could not be more specific). She said that she had lodged the application for legal aid when she was advised by her then solicitor that she would be required to deposit money in the solicitor’s trust account if she wanted his representation at the hearing commencing 11 February 2014.

87.The wife said that she had lodged an application to review the refusal of legal aid but was unable to say when the application was lodged. She said that she had been advised that her application would be determined by 14 February 2014.

88.The wife said that no solicitor had indicated a willingness to act for her in the proceedings. (It is noted, in passing, that the Court file now occupies four large boxes.) The wife conceded that, if she found a solicitor willing to act for her, some time would be required for that solicitor to read and digest the material. She conceded that she was seeking an adjournment for about six months. The wife may not be able to find a solicitor prepared to act for her, even if legal aid is granted, when the matter is complex and the prospects of her succeeding in recovering any money ordered to be paid are slight. The Court could not be satisfied that the wife would be in any better position after six months, or when the matter was finally listed, than she was in on 11 February 2014.

89.The wife was unable to provide to the Court the letter from the Legal Aid Commission refusing her application or a copy of her Application for Review.

90.The wife said that she had not read section 57 of the Legal Aid Commission Act 1979 (NSW) (“section 57”).

91.The parties were provided with a copy of the provisions of section 57, a copy of the judgment of the Full Court in Rowell v Keogh [2011] FamCAFC 74, and were given a short adjournment to consider their respective submissions. In that time, the wife was able to speak with the Duty Solicitor. After the adjournment, the wife told the Court that the Duty Solicitor was able to provide a letter from the Legal Aid Commission confirming the lodgement of the application to review and the date the review would be determined.

92.The parties then made submissions. Both the husband and the Respondents opposed the adjournment.

93.The wife tendered a letter from the Legal Aid Commission indicating that she had lodged her application for review on 11 October 2013 and that the matter would be considered on 13 February 2014.

94.Counsel for the Respondents tendered a letter from the wife’s former solicitor dated 7 February 2014 stating, inter alia “We no longer act in this matter and so advised our client on about 14 January 2014”.

95.After consideration, the application for adjournment was refused. In order to give the wife some time to prepare her cross-examination of the husband and of Mr and Ms YY, the matter was adjourned to commence the following day. The parties were told that the reasons for refusal of the application would be given in the judgment in the substantive proceedings. These reasons follow.

96.The provisions of section 57 are set out below:

Adjournment of certain proceedings

Where it appears to a court or tribunal, on any information before it:

(a) that a party to any proceedings before the court or tribunal:

(i) has appealed, in accordance with section 56, to a Legal Aid Review Committee and that the appeal has not been determined, or

(ii) intends to appeal, in accordance with section 56, to a Legal Aid Review Committee and that such an appeal is competent,

(b) that the appeal or intention to appeal is bona fide and not frivolous or vexatious or otherwise intended to improperly hinder or improperly delay the conduct of the proceedings, and

(c) that there are no special circumstances that prevent it from doing so,

the court or tribunal shall adjourn the proceedings to such date on such terms and conditions as it thinks fit.

97.I am satisfied that the wife has appealed from the determination of the Legal Aid Commission and that the appeal had not been determined as of the date of hearing.

98.Counsel for the Respondents submitted that there was no “information” (to use the term of the section), or evidence, to satisfy the Court that the appeal is bona fide and not “frivolous or vexatious or otherwise intended to improperly hinder or improperly delay the conduct of the proceedings”. I am conscious of the fact that, before the hearing commenced, the wife had not read the terms of section 57. She appeared without legal representation although she had been advised that her application should be made relying on section 57. She had an opportunity to speak with the Duty Solicitor before she concluded her submissions. She did not address the provisions of section 57(b) in her submissions or adduce any evidence in relation to that provision.

99.However, I am satisfied that a litigant in long running and complicated proceedings such as these would wish to be represented and I accept that the wife’s appeal to the Legal Aid Review Tribunal is in a bona fide effort to obtain legal representation and is brought for no improper motive.

100.That does not however, detract from the fact that her application, if granted, would have the effect of substantially delaying the completion of the proceedings, which are already protracted.

101.After the determination of the appeal, the matter was listed for hearing for 3 days commencing 4 June 2013 and for directions on 19 April 2013. On 19 April 2013, directions were made for all applications and affidavits to be filed by close of business on 24 May 2013. The wife’s Application in a Case seeking, inter alia, the joinder of Mr G Sanders and Mr W Sanders was stood over to 14 May 2013.

102.On 14 May 2013 orders were made joining Mr G Sanders and Mr W Sanders.  

103.When the hearing commenced on 4 June 2013, the applications by the wife for orders affecting U Pty Ltd, CG Pty Ltd, K Pty Ltd, Y Pty Ltd, N Holdings Pty Ltd, Mr G Sanders and Mr W Sanders were withdrawn and dismissed. Counsel for the wife then made an oral application to amend her application. The wife was directed to file and serve a written application for leave to amend and written submissions within 14 days and to serve those documents upon the respondents. The matter could not continue as a consequence of the wife’s Application for Leave to Amend and the matter was adjourned for mention only on 1 July 2013.

104.On 1 July 2013 the respondents and husband were ordered to file and serve any applications and written submissions upon which they wished to rely within four weeks and the Application for Leave to Amend was listed for hearing on 22 October 2013. The Application for Leave to Amend was refused and the substantive matter was listed for call over on 13 December 2013 when dates were allocated to complete the hearing for two days commencing 11 February 2014.

105.The only reason that the matter could not proceed in June 2013 was the wife’s Application for Leave to Amend. Thus the re-hearing had already been delayed for 8 months as a consequence of the wife’s application.

106.Had the matter been adjourned for six months as the wife asked, it would have been listed for call over in October and would have been given dates in the first quarter of 2015.

107.The issue to be determined, considering the provisions of section 57(c), is whether there are special circumstances which prevent the proceedings from being adjourned.

108.The wife’s Application to Review the decision of the Legal Aid Commission was filed on 11 October 2013. The inference arises that her application for legal aid, filed, she said, after her former solicitor told her that he would not represent her unless he was put in funds, must have been filed well before that date. There was no suggestion from the wife that her former solicitor had told her he would represent her if legal aid were granted. That would seem to be unlikely in circumstances where the wife told the Court that she still owed her former solicitor between $400,000 and $500,000 after paying him $300,000.

109.Thus the wife must have known, from at least September 2013, that her former solicitor would not be representing her in the re-hearing commencing on 11 February 2014. At no time between September 2013 and 11 February 2014 was that fact brought to the attention of the Court by either the wife or her former solicitor.

110.The husband and the Respondents (through their Counsel) prepared for the matter to commence on 11 February 2014.

111.The matter was listed for judicial callover on 13 December 2013. The wife’s former solicitor appeared at the callover. He did not inform the Court that he would not be representing the wife unless funds were deposited in his trust account. He did not inform the Court that the wife had filed an Application to Review the decision of the Legal Aid Commission some two months before the callover. Had he done so, enquiries could have been made to ascertain when the matter might be reviewed and later dates set. The husband and the Respondents might then have been aware that there was some possibility that the matter would not proceed in February 2014.  They, and the Court, could then have made arrangements accordingly.

112.The Respondents have incurred legal costs in being represented by a solicitor and Counsel, who had prepared the matter to proceed on the allocated date. If the matter is adjourned, those costs are, at least in part, thrown away and there is no evidence that satisfies me that the wife is, or will be, in a position to pay even Counsel’s fees thrown away.

113.The history of the proceedings is set out earlier in these reasons. The proceedings commenced by an application filed on 13 December 2007. After the conclusion of the proceedings before Cleary J and until 22 October, all of the Respondents including the husband represented themselves because they could not afford representation. In the course of the proceedings the companies through which the husband and the Respondents conducted their business have ceased to exist and have been found by the single expert, Mr E, to have no value.

114.The wife, in her affidavit sworn 31 May 2013 deposes to her assets being $247.36 in bank accounts and superannuation of $27,618. Her only other assets are said to be money owed to her by the Sanders Family Trust in the sum of $1,450,000. It is common ground that the Sanders Family Trust has a value of $10. She deposes to income from Centrelink of $447 per week.

115.The husband, in his Financial Statement sworn 9 May 2013, deposes to an income, including re-imbursement of vehicle expenses and superannuation payments by his employer, of $1,030 and expenses (excluding credit card repayments) of $1,378 per week. He has re-partnered and his partner has an income of $190 per week.

116.He deposes to bank accounts totalling $1,891 and household contents worth $15,000. He has superannuation entitlements of $90,060. He deposes to debts, including outstanding legal fees, of $98,419.

117.At paragraph 11 and 12 of his affidavit sworn 9 May 2013, the husband deposes:

My position is now very serious indeed. I continue to be treated by my Doctor (Dr [DD]) for serious depression and anxiety attacks and continue on medication for such. I have now been treated for these conditions for over 4 years with no improvement in sight….

These conditions have been exacerbated by my appalling personal financial position, the collapse of the business I started 23 years ago and the protracted nature of the divorce proceedings (5 ½ years).  

118.At Paragraph 1.12 of her Application, the wife seeks an Order that the husband pay spousal maintenance in the sum of $1,340 per week. She asks that the Order be “backdated” to commence on 5 November 2009 and that the husband pay all arrears thus created within 14 days. The arrears, payable within 14 days, would be approximately $286,000.

119.There was no evidence which suggested that the husband had any capacity to pay spousal maintenance at all and no evidence to suggest that he had funds from which to pay the lump sum of arrears. Therefore on the evidence at the date of the application for the adjournment, the application for spousal maintenance must fail.

120.The wife seeks, relevantly, at Paragraph 1.8 of her Amended Application filed 29 April 2013, an order that would have the effect that the husband and [Mr and Ms YY] only (the other respondents being either not parties to the proceedings or no longer in existence for relevant purposes) pay to her the sum of $1,457,000 plus interest. Why the wife is entitled to be reimbursed the whole amount that the husband and the wife paid in satisfaction of the guarantee is unexplained in circumstances where the corporate entities controlled by them owned 70 per cent of NPA, on whose behalf the guarantees were given.

121.There is no evidence that the husband has any ability to meet such an order.

122.Mr YY has no income. Ms YY is employed and deposes in her Financial Statement that she earns $3,849 per week and expenses which exceed her income. They own their home which they estimate to be worth $730,000. There is no other evidence of its value. Ms YY has shares she values at $10,000. They each have modest superannuation but there is no evidence to suggest that either of them could have access to those funds. There is a mortgage of $408,000 over their home and they have other business loans totalling $136,000 which I infer would be secured over their home. Thus the equity in their home is $189,000. Mr YY has a taxation liability, personal loan and credit card debts of $54,699. Their net assets are approximately $144,000.

123.Ms YY deposes that due to the industry she is employed in, her future employment would be at risk if she became bankrupt.

124.Leaving aside the real issue of whether the Court has the power to make the Orders sought by the wife against Mr and Ms YY who are third parties to the proceedings, the evidence  suggests that an order as sought by the wife against Mr and Ms YY would result in their losing their home and becoming bankrupt. They do not have sufficient assets to satisfy the order sought.

125.Since the application to review the decision of Judicial Registrar Loughnan (as he then was) was formulated prior to the hearing before Clearly J, Mr and Ms YY have lived in the shadow of an application by the wife that they pay to the wife part or all of the sum of $1,457,000. The terms of Order 8 of the wife’s application before Cleary J are set out at Paragraph 33 of these reasons.

126.In her affidavit sworn 18 October 2013, Ms YY deposes:

Since we became involved in these proceedings my husband and I have been under unrelenting financial and emotional pressure which has had a very detrimental effect on our marriage and (Mr [YY]’s) health. On the morning of 29 January 2013 at approximately 1.30am I found (Mr [YY]) on the floor of our home near death following a suicide attempt and I believe, but for the fact that we live in close proximity to a public hospital he would have died. Since that time (Mr [YY]) has been under psychological care. (Mr [YY]) and I now sleep apart.

127.Annexed to the affidavit of Mr YY sworn 3 May 2013 is a letter dated 18 April 2013 from his treating psychologist, Mr MM, confirming that Mr YY was admitted to NN Hospital following a deliberate overdose suicide attempt. Mr YY is being treated for depression, anxiety and is “dealing with significant life stressors; two of which are dealing with financial strain and the impact of protracted legal proceedings”. Mr MM comments that, in therapy sessions, Mr YY has made frequent references to the manner in which the legal proceedings have affected his mental health and his marriage.

128.The effect on Mr YY of the protracted proceedings would, taken alone, constitute special circumstances such that the Court would be prevented from granting the section 57 adjournment.

129.However the effect on Mr YY’s health is not the only matter to be taken into account.

130.I also have regard to the following matters:

·The effect on the husband’s health of the protracted proceedings.

·The Full Court would have re-exercised the discretion of the Trial Judge had the wife agreed. The reason advanced on behalf of the wife was that Mr E might be cross-examined and further evidence filed in consequence of his report. Mr E was not required for cross-examination and no further evidence was filed.

·The wife having lodged her Application to Review the decision of the Legal Aid Commission on 11 October 2013, did not, through her former solicitor, inform the Court of that fact at the call over on 13 December 2013.

·The wife’s former solicitor did not inform the Court that he would not be acting for the wife in the hearing.

·The wife was told by her solicitor in about September 2013 that he would not represent her unless he was placed in funds.

·The hearing has already been delayed for eight months because of the wife’s actions in seeking, unsuccessfully, to amend her application.

·There is little or no prospect of any orders being satisfied from the assets of the husband or the Respondents.

·The proceedings between the husband and the wife have been on foot since 13 December 2007.

·If the adjournment were granted the matter would be heard in 2015.

·There is no evidence to suggest that the wife will be in any better position when the matter is listed in 2015 than she is today. (In her later written submissions in relation to the power to make orders against third parties, the wife said that her Application to Review the refusal of legal aid had been unsuccessful. That information was not available when the decision to refuse the adjournment application was made).

·The whole of the money which the wife received from the property settlement pursuant to the orders of Loughnan JR (as he then was), some $328,000, has been spent by the wife, including payment of $300,000 to her former solicitors. There is no property available for division between the husband and the wife.

131.Having regard to all of those matters, special circumstances exist in this case that prevent the adjournment of the proceedings to a date in 2015.

THE SUBSTANTIVE APPLICATIONS

132.The wife sought to proceed, inter alia, with Paragraphs 1.8 and 1.12 of her Amended Application filed 29 April 2013. The balance of the paragraphs pressed were machinery provisions. Paragraph 1.8 contains the orders sought against the Respondents and the husband. Paragraph 1.12 contains the wife’s application for spousal maintenance.

133.The wife, the husband and Mr and Ms YY were cross-examined.

SPOUSAL MAINTENANCE

134.The wife sought the following order:

1.12 That the Respondent Husband do pay to the Applicant Wife by way of spousal maintenance with effect as from 5 November 2009 in the sum of $1,340 per week and that he do pay the arrears as at the date of these orders within 14 days.

135.I am satisfied that the wife has met the threshold test in section 72 of the Act in that by reason of age or physical or mental incapacity she is unlikely to be gainfully employed. She is 53 years old. She has not been in employment since the parties separated and she has back problems although there is no medical evidence in relation to her health. She has been assessed as eligible for a Disability Pension. In the circumstances of this case I am prepared to accept that assessment as evidence of inability to work.

136.The issue then is whether the husband has any capacity to pay spousal maintenance. His financial position is set out at Paragraphs 115 and 116 of these reasons. His evidence in relation to his financial position was not challenged. He has no capacity to pay spousal maintenance.

137.In those circumstances it is not necessary to consider the reasonableness or otherwise of the wife’s application to “backdate” the order to November 2009 or her application that he immediately pay the arrears so created.

138.The application for spousal maintenance will be dismissed.

THE SECTION 79 APPLICATION – THE WIFE’S APPLICATION FOR PAYMENT BY THE HUSBAND

139.Section 79(2) of the Act requires that I consider whether it is just and equitable, in all of the circumstances of this case, to make any order. As between the husband and the wife, they have put into effect the orders made in 2009. The wife received $328,116 and the husband received $59,408. All of the money received by each of them has been spent. There is no property left to be divided. In those circumstances it is not just and equitable, as between the husband and the wife, to make any adjustment. It was conceded by the husband, as is set out later in these reasons, that if it was determined that the wife had no assets, then no adjustment could or should be made. No such concession was made by the wife.

140.The wife sought the following order:

1.8Pursuant to section 79 that [Y Pty Ltd], [S Pty Ltd] and [AS Pty Ltd] together with the husband, [Mr EB], [Ms YY], [Mr YY], [Mr G Sanders] and [Mr W Sanders] do jointly and severally forthwith pay to the wife all monies which were paid to the National Australia Bank in reduction of the facilities granted to [NE] Group by the bank in respect of accounts numbered …44 and …21 and …43 in the sum of $1,457,000 together with interest at the respective rates last charged by the National Australia Bank to [NE] Group in respect of such loans computed from the date of the payment to the National Australia Bank by the husband and wife to the date of payment.

141.In relation to the order sought against the husband, there is no evidence that he has any capacity to pay any money to the wife. To make any order would be futile.

142.The wife did not bring evidence to explain her submission that the husband should be ordered to pay money to the wife pursuant to their joint guarantee when the whole of the debt was satisfied from the sale of their jointly owned home and the wife received 77 per cent of the net matrimonial assets then remaining.

143.In all of the circumstances referred to above, the wife’s application will be dismissed.

THE WIFE’S APPLICATION FOR ORDERS AGAINST THE RESPONDENTS

144.At the conclusion of the oral evidence, the parties made submissions. Both the wife and the husband tendered written submissions. No submissions were directed by the wife, the husband or Counsel for the respondents to the power of the Court to make orders as sought by the wife against the respondents who are third parties.

145.Counsel for the respondents was directed to file written submissions in relation to that issue within seven days and the parties were directed to file any response within a further seven days.

146.The wife filed written submissions.

147.The husband advised that he did not wish to file any further submissions.

THE POWER OF THE COURT TO MAKE THE ORDERS SOUGHT BY THE WIFE AGAINST THIRD PARTIES

148.In relation to the Respondents, who are third parties to the proceedings, the power to make orders in an application pursuant to section 79 affecting the property of the third parties is found in Division VIIIAA of the Act.

149.The Objects of the Division are set out in section 90AA in the following terms:

The object of this Part is to allow the court, in relation to the property of a party to a marriage, to:

(a) make an order under section 79 or 114; or

(b) grant an injunction under section 114;

that is directed to, or alters the rights, liabilities or property interests of a third party.

150.The orders sought by the wife would, if granted, have the effect of creating a liability of the respondents, not altering their existing rights, liabilities or property interests.

151.The circumstances in which the Court, in section 79 proceedings, can make orders which affect the rights of third parties are set out in section 90AE.

152.The relevant provisions of section 90AE are set out below:

(1) In proceedings under section 79, the court may make any of the following orders:

(a) an order directed to a creditor of the parties to the marriage to substitute one party for both parties in relation to the debt owed to the creditor;

(b) an order directed to a creditor of one party to a marriage to substitute the other party, or both parties, to the marriage for that party in relation to the debt owed to the creditor;

(c) an order directed to a creditor of the parties to the marriage that the parties be liable for a different proportion of the debt owed to the creditor than the proportion the parties are liable to before the order is made;

(d) an order directed to a director of a company or to a company to register a transfer of shares from one party to the marriage to the other party.

(2) In proceedings under section 79, the court may make any other order that:

(a) directs a third party to do a thing in relation to the property of a party to the marriage; or

(b) alters the rights, liabilities or property interests of a third party in relation to the marriage.

153.The respondents are not creditors of the husband and the wife. The wife may have a right to seek contribution from them, relying on the doctrine of equitable contribution, but that right has not been determined in these proceedings. The husband may also have a right to seek contribution from the respondents but he may be estopped from so doing by his representations to Mr YY. I accept the evidence of the husband and Mr and Ms YY that the husband promised Mr YY that he (the husband) would never call upon Mr and Ms YY’s guarantees if the business failed. I accept the unchallenged evidence of Mr and Ms YY that they entered into the guarantee relying on the husband’s assurances. The husband gave evidence that he had made promises to Mr YY in the terms asserted by Mr YY.

154.There is a dispute between the husband and the wife as to whether the husband discussed the giving of those promises with the wife before he made them. He asserts that this was a constant topic of conversation. She, although she said her memory of the relevant period was vague, denied that she had ever agreed with the husband that they would not call upon the respondents pursuant to the guarantee.

155.It is not necessary for the purpose of these proceedings to determine those issues.

156.If there is a right of either the wife or the husband to seek contribution from the respondents arising from the guarantee, then that right  is the property of the parties, or one of them, and is unaffected by these orders.

157.Dealing with the provisions of section 90AE seriatim:

·The Respondents are not creditors and therefor the provisions of subsections (1)(a), (b) and (c) do not apply.

·The Respondents are not directors being required by order to transfer shares from one party to the marriage to the other and therefore the provisions of subsections (1)(d) do not apply.

·The Court is not being asked to do a thing in relation to the property of a party to the marriage and therefore the provisions of subsection (2)(a) do not apply. The asserted right of the wife or the husband and wife jointly to make a claim against the Respondents is property of the husband and the wife. However that claim has not been determined and there is no property of the marriage in relation to which the Respondents can be directed to do anything.

158.In relation to section 90AE(2)(b), the Full Court in  B Pty Ltd and Ors & K and Anor [2008] FamCAFC 113 said:

In our view, all that s 90AE(2)(b) does, of relevance to the wife’s claim here, is to enable the court to adjust the property interests of a third party for the purpose of effecting a division of the present property of the parties to the marriage, between those parties.  Only in the sense that altering interests may leave a bundle of rights or interests that are consequent upon the alteration, may the exercise of power create interests, but these “new” interests will be the residue of what already existed at law.  Except in this sense, the subsection does not create a new cause of action derived from rights not previously known to the law.  In this sense, the subsection resembles a machinery provision, though in our opinion it is more than that. (emphasis as in the original).

And relevantly to the present matter:

In our view, the correct conclusion was that, as the wife set out her proposed claim, she did not show that the power conferred by s 90AE could arguably be engaged.  Any order made pursuant to s 90AE(2)(b) must be for the purpose of effecting a division of property between the parties.  The order that the wife proposed was for the purpose of increasing the property of the parties, by an unknown amount and on unknown principles. (emphasis as in the original).

159.The Full Court in AC and Ors & VC and Anor [2013] FamCAFC 60 said:

In relation to both s 90AE(2)(b) and s 90AF(2)(b) we take the opportunity to point out the uncertainty of meaning of the words "alters the rights, liabilities or property interests of a third party in relation to the marriage". It is the last five words which cause the difficulty. The Full Court in B Pty Ltd v K (2008) FLC ¶93-380 expressed a similar view. We note that O'Ryan J offered this explanation in Hunt v Hunt (2007) 36 Fam LR 64 at 113:

When s 90AE(2) is read in conjunction with s 90AE(3), s 79, and Pt VIIIAA generally, it is clear that what is contemplated is not some arbitrary invasion of the rights of a third party but an alteration of those rights where they are sufficiently connected to the division of the property between parties to a marriage.

160.The property of the respondents is neither connected nor sufficiently connected to the division of the property of the husband and the wife and therefore the provisions of subsection (2)(b) do not apply.

161.Therefore, the Court has no power, conferred by the provisions of section 90AE, to make the orders sought by the wife against the respondents in Paragraph 1.8 of her Amended Application.

162.If the finding, in Paragraphs 159 and 160 above, is wrong in relation to the application of the provisions of section 90AE, section 90AE(3)(d) must be considered. This section reads:

The court may only make an order under subsection (1) or (2) if the court is satisfied that, in all the circumstances, it is just and equitable to make the order.

163.Section 90AE(4)(f) must also be considered. The court must be satisfied as to the economic, legal or other capacity of the third party to comply with the order.

164.Section 90AK must also be considered.  This section reads:

(1) The Court must not make an order or grant an injunction in accordance with this Part if the order or injunction would:

(a)  result in the acquisition of property from a person

otherwise than on just terms.

WHETHER THE PROPOSED ORDERS ARE JUST AND EQUITABLE AS AGAINST THE THIRD PARTY RESPONDENTS.

165.The wife seeks an order which would require the Respondents and the husband, jointly and severally to pay to her the sum of $1,457,000. Since the husband has no ability to satisfy the order, the result would be that the respondents would be required to pay the full amount to the wife.

166.There is no evidence which supports the wife’s claim that the respondents should be solely liable for the whole of the money paid from the sale of the former matrimonial home pursuant to the guarantees.

167.There is no evidence which supports the wife’s claim to be entitled to be repaid the entire amount to the exclusion of the husband.

168.The husband and the wife beneficially owned 70 percent of NPA. The husband and the wife were joint and several guarantors. The wife gives no evidence which explains why, prima facie, the husband and the wife should not be liable for 70 per cent of the debt.

169.The respondents were not the only third party guarantors. Mr EB and AS Pty Ltd were also joint and several guarantors. There is no evidence of any attempt to join Mr EB and AS Pty Ltd as parties to the proceedings. Although both are named parties, there is no evidence of service upon either of them or any attempted service.

170.There is no evidence before me upon which I could decide what, if any, contribution should be made by the respondents on the guarantee and therefore it is not just and equitable to make any order.

THE CAPACITY OF THE RESPONDENTS TO COMPLY WITH ANY ORDER

171.In paragraphs 121 to 123 of these reasons I have set out the unchallenged evidence about the assets and liabilities of Mr and Ms YY.

172.They have little or no capacity to comply with any order for the payment of money.

173.The only evidence of the financial position of S Pty Ltd is that it was in the process of liquidation as at 14 May 2013. I cannot find that S Pty Ltd has any ability to satisfy any order for the payment of money to the wife.

ACQUISITION ON UNJUST TERMS

174.Absent a decision that Mr and Ms YY have a liability to the husband and the wife, or either of them, an order for the payment of money to the wife, as she seeks, must result in acquisition of that fund otherwise than on just terms.

CONCLUSION

175.If I am wrong in determining that the provisions of sections 90AE(1) and (2) do not operate to give the Court power to make the order sought by the wife against the respondents, for the reasons set out above, I would decline to exercise that power.

THE HUSBAND’S SECTION 79 APPLICATION

176.The husband’s application is set out in a Minute of Orders attached to his affidavit sworn 9 May 2013. He seeks the following orders:

(1)That the Wife’s application be dismissed.

(2)That the wife be ordered to refund to the husband from funds already distributed to her the amount received by her on settlement of the sale of the family home that exceeded 50% of the net proceeds.

177.In submissions, the husband conceded that, if it were determined that neither the husband nor the wife had any assets from which to meet an order in those terms, then his application should be dismissed.

178.The wife’s financial position according to her sworn evidence has been set out earlier in these reasons. She has no significant assets although it was established in cross-examination that she has furniture in storage.

179.The husband asserted that the wife should have retained some $200,000 of the sum of $328,116 which she received from the proceeds of sale of the former matrimonial home. He tendered a document produced by the wife’s former solicitors entitled “Notice as to Costs” dated 4 June 2013. That document was clearly created in accordance with the Rules for the first day of the re-hearing on 4 June 2013.  

180.The document indicates that the wife had paid a total of $127,761.79 in legal fees to her former solicitors in costs and disbursement including Counsel’s fees. The husband asserted that because the wife had received $328,116 and paid $127,761.79, she must have retained the balance.

181.The husband’s submission and cross-examination was based upon his assumption that the Notice as to Costs related to the costs of the whole of the proceedings including the hearing before the Judicial Registrar, the hearing before Cleary J and the Appeal. There was no evidence that this assumption was correct. When Counsel for the respondents helpfully pointed out to the husband that the wife had produced documents showing payments for costs and disbursements prior to the commencement of the current proceedings before me, the husband did not pursue this cross-examination.

182.I accept that the wife’s current financial position is as she deposed in her Financial Statement sworn 31 May 2013 and that she has no ability to satisfy any order made in favour of the husband.

183.Accordingly, the husband’s application will be dismissed.

COSTS

184.Both the husband and the wife seek indemnity costs as against the other. Those applications are determined having regard to the provisions of section 117(2A) of the Act.

185.It may be that the wife’s conduct of the proceedings would justify an order for costs against her.

186.The wife has been wholly unsuccessful in the proceedings.

187.However the wife has no funds to satisfy any order I might make and there is no utility in such an order. Therefore the husband’s application for costs will be dismissed.

188.The wife has not demonstrated that any of the provisions of section 117(2A) could be applied to justify an order for costs against the husband or the respondents. In any event, neither he nor the respondents have funds to satisfy an order for costs. The wife’s application for costs against the husband and the respondents will be dismissed.

I certify that the preceding one hundred and eighty-eight (188) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 25 March 2014.

Associate: 

Date: 25 March 2014