Sanders & Sanders & Ors

[2013] FamCA 871

FAMILY COURT OF AUSTRALIA

SANDERS & SANDERS AND ORS [2013] FamCA 871

FAMILY LAW ─ PROPERTY PROCEEDINGS – Settlement in relation to marriage – Application for Leave to Amend during a re-hearing following an appeal in the Full Court – Where the wife in the re-hearing sought to amend her application and to proceed on a claim against the respondents based on the equitable doctrine of contribution from a guarantor – Consideration of matters relevant to the Court’s power to permit amendment including substantial delay, wasted costs, prejudice and case management concerns

Family Law Act 1975 (Cth) s 79

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
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: 1 November 2013

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: 4 and 5 June and 22 October 2013

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: In Person

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: In Person

COUNSEL FOR THE 11^TH RESPONDENT: No Appearance

COUNSEL FOR THE 12^TH RESPONDENT: In Person

COUNSEL FOR THE 13^TH RESPONDENT: In Person

Orders

1. That the wife’s application for leave to amend her application filed 29 April 2013 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 corporate entities associated with him; the husband’s former business associates, Mr YY and Mr EB, and corporate entities associated with them; and the two sons of the husband and the wife and their corporate vehicles.

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 Limited.

5. The matter comes before me 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. In an effort to re-exercise 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.

7. None of the respondents were legally represented in the hearing of the Appeal.

8. 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 further evidence to be heard, and the Full Court could not re-exercise the discretion. The matter was remitted by the Full Court for re-hearing before me.

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

10. After the judgment of the Full Court was delivered, U Pty Limited transferred its interest in NPA to M Company, a company in which S Pty Limited held 24 per cent of the shares and K Pty Limited and CG Pty Limited 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.

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

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

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

14. In the course of a directions hearing on 19 April 2013, the husband told the Court that U Pty Limited, N Holdings Pty Limited and Y Pty Limited 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.

15. In the course of a readiness hearing on 14 May 2013, the wife’s solicitors were advised that CG Pty Limited and K Pty Limited 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 Limited was also in the process of liquidation.

16. 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. Mr EB did not appear and has not been served with the amended application. There was no appearance on behalf of AS Pty Limited and no affidavit of service upon AS Pty Limited was tendered.

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

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

19. When the 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.

20. On the re-hearing the wife sought orders against the 13 respondents referred to above 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 Limited] in its capacity as trustee of the [F Trust], [S Pty Limited] in its capacity as trustee of the [YY] Family Trust; and [K Pty Limited] in its capacity as trustee of the [J] Trust hold their respective units and other interests in [U Pty Limited] upon trust for [Y Pty Limited] in its capacity as trustee of the [Sanders] Family Trust and [S Pty Limited] in its capacity as trustee of the [YY] Family Trust for their respective rights and interests.

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

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

    1.4That [U Pty Limited] 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 Limited], [S Pty Limited] and [AS Pty Limited] 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”).

    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 Limited], [S Pty Limited] and [AS Pty Limited] 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 Limited] 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 Limited 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 Limited do jointly and severally forthwith pay to [N Holdings] Pty Limited 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 Limited to [N] Holdings Pty Limited 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 Limited] 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 Limited, [Mr YY], [Ms YY], [S] Pty Limited, [Mr EB], [AS] Pty Limited, [K] Pty Limited, [CG] Pty Limited, [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 Limited] 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 Limited and/or [N Holdings Pty Limited].

    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.

1. On the first day of the hearing before me, 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.

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

3. Counsel for the wife told the Court that, by way of the 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.

4. It was asserted on behalf of the wife that adequate notice of that claim had been provided in Clause 1.8 of the Application in a Case which, for ease of understanding, is set out again below: 

   1.8Pursuant to section 79 that [Y Pty Limited], [S Pty Limited] and [AS Pty Limited] 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.

5. 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 Family Law Act 1975 (Cth) (“the Act”). Counsel for the wife conceded that, if the Court were to entertain an application for the relief that the wife now seeks 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.

6. 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 the guarantee pursuant to equitable principles, relying on accrued jurisdiction.

7. That cause of action has never before been enunciated on behalf of the wife. The personal guarantees had been executed on 13 February 2007, prior to the hearing before Judicial Registrar Loughnan (as he then was).

8. 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.

9. In the proceedings before Cleary J, Mr and Ms YY and S Pty Limited 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 Limited] in its capacity as trustee of the [F Trust], [S Pty Limited] in its capacity as trustee of the [YY] Family Trust; and [K Pty Limited] in its capacity as trustee of the [J] Trust hold their respective units and other interests in [U Pty Limited] upon trust for [Y Pty Limited] in its capacity as trustee of the [Sanders] Family Trust and [S Pty Limited] in its capacity as trustee of the [YY] Family Trust for their respective rights and interests.

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

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

   4.[U Pty Limited] 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 Limited], [S Pty Limited] and [AS Pty Limited] 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 Limited], [S Pty Limited] and [AS Pty Limited] 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 Limited] 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 Limited 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 Limited do forthwith pay to [N Holdings] Pty Limited 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 Limited to [N Holdings] Pty Limited 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 Limited 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 Holdings] Pty Limited 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.

10. No order was sought against Mr and Ms YY for equitable relief in the exercise of the accrued jurisdiction of the Court.

11. 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.

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

13. On 4 June 2013 the wife provided the Court and the respondents with a Minute of Orders, 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.

14. Mr YY was in Court. Ms YY was not. She had no notice of the proposed amended application. The matter was adjourned to the following day to allow for Ms YY to be served and for the respondents to consider their positions. On the following day, Ms YY did not appear but acknowledged that she had been served with the 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 amended application, it could not authorise Mr YY to appear on her behalf as he is not a legal practitioner.

15. Mr YY indicated that he wished to seek legal advice in relation to the proposed amended application.

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

17. I directed that the application for leave to amend should be heard and determined before the substantive application proceeded further. Leave to amend an application is not automatic.

18. The hearing resumed on 22 October 2013.

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

20. 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.The husband sought in [1]-[17] of his affidavit sworn on 9 June 2011 to explain that he had in some way found himself unable to deal with the proceedings before the Court. The husband’s explanation for his non-compliance is set out at [34] of these reasons. Essentially the husband asserted that he was not able to mentally deal with the proceedings in the Federal Magistrates Court and the husband believed he psychologically blocked out the proceedings. No medical evidence was adduced to support his assertion that he was mentally unable to deal with the matter or that he had psychologically blocked the proceedings out. Nor did the husband elaborate further about those assertions. Thus it was unclear what might have caused him to “negate” dealing with the proceedings before her Honour.

    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.”

21. I consider firstly the delay on the part of the wife in bringing her claim: No attempt has been made to provide an adequate or, indeed, any explanation for the delay. The claim was raised on the first day of the hearing after orders had been made that any material to be relied upon by the wife was to be filed by close of business on 24 May 2013. The equitable claim would have been raised before Cleary J.

22. 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. To the contrary, the wife agreed that it would be appropriate for the Full Court to re-exercise the discretion if it were able to do so. Implicit in that agreement is a concession that there were no matters relevant to the exercise of discretion that had not been canvassed.

23. 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.

24. 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.”

1. 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.

2. In his affidavit sworn 18 October 2013 he deposes to being under ongoing psychological care. Ms YY deposes to having found Mr YY near death on 29 January 2013 after he attempted suicide.

3. 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 of $528,000. Mr and Ms YY, through their family trust of which S Pty Limited 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.

4. Ms YY in her affidavit sworn 18 October 2013 deposes to substantial risk to her employment if she should be bankrupt due to the industry she is employed in.

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

6. 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.

7. 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.

8. 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.

9. 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 hearing dates before me 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.

10. The matter was mentioned before me 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.

11. In my view, the matters that are set out above are sufficient to conclude that there is an “irreparable element of unfair prejudice in delaying proceedings” (see Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at [5]).

12. 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.

13. 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.

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

15. Y Pty Limited has been deregistered. Mr E values the assets of the Sanders Trust (I) at $10. Mr and Ms YY have a potential claim for contribution against Y Pty Limited. 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.

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

    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)

17. And at page 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)

18. In the present case, each guarantor is a guarantor for the whole amount. Y Pty Limited has been voluntarily de-registered. In the ordinary course of events this would indicate that Y Pty Limited is solvent. Equity would require Y Pty Limited to be joined. In order for that to happen, Y Pty Limited would need to be re-registered.

19. O’Donovan and Phillips, at page 818, explain:

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

20. More relevantly, Mr EB is a guarantor and is jointly and severally liable with Mr and Ms YY and S Pty Limited. He is not a party to the proceedings and the proposed application is therefore defective. That is a further reason, if such were necessary, to refuse the wife’s application to amend.

21. The principal borrowers, referred to in the Deed of Guarantee as “Customer”, are Y Pty Limited, S Pty Limited and AS Pty Limited. 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 Limited has been liquidated and AS Pty Limited is not a party to the proceedings. There is no evidence before me of the net asset position of S Pty Limited.

22. In weighing all the matters relevant to the exercise of the power to permit amendment, which include substantial delay, wasted costs, prejudice and concerns of case management, the Court comes to the conclusion that leave to amend should not be granted. Given the nature of the application now sought by the wife, the circumstances in which it was sought, 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 reason) when this could have occurred, the wife’s application for leave to amend should not be allowed.

I certify that the preceding sixty-six (66) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 1 November 2013

Associate: 

Date: 1 November 2013