SORA and SORA & Ors

[2010] FamCA 465

FAMILY COURT OF AUSTRALIA

SORA & SORA AND ORS [2010] FamCA 465

FAMILY LAW – PRACTICE AND PROCEDURE – Joinder of third parties  -  Amendment to alter orders sought

Family Law Act 1975 I

Aon Risk Services Australia Limited  v  The Australian National University (2009) HCA 27
Lanceley (1994) FLC 92-491

APPLICANT: Ms Sora

RESPONDENT: Mr Sora

SECOND RESPONDENTS:

T Soratis

S Soratis
C Soratis

THIRD RESPONDENTS: M Pty Ltd

FILE NUMBER: MLC 4287 of 2007

DATE DELIVERED: 10 JUNE 2010

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: 4 JUNE 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR BARTFELD QC WITH MS VOHRA

SOLICITOR FOR THE APPLICANT: LANDER & ROGERS

COUNSEL FOR THE RESPONDENT: MR SWEENEY

SOLICITOR FOR THE RESPONDENT: GSM LAWYERS

COUNSEL FOR THE 2^ND AND 3^RD RESPONDENTS: MR ST JOHN SC WITH MR STRUM

SOLICITOR FOR THE 2^ND AND 3^RD RESPONDENTS: DERMENZIES LAWYERS

Orders

1. That the Application in a Case filed by the husband on 16 April, 2010 is dismissed save as to issue of costs. 

2. That the Response filed by the wife on 10 May, 2010 is dismissed save as to issue of costs. 

3. That any application by any party for costs shall be filed and served on all other parties by written submission by no later than 4:00 pm. on 18 June, 2010 and any reply thereto be filed and served on all other parties by no later than 4:00 pm. on 25 June, 2010 and that any reply thereto be filed and served on all other parties by no later than 4:00 pm. on 2 July, 2010. 

4. That any submission in relation to costs be determined by the Hon. Justice Cronin in chambers. 

5. That the wife file and serve an amended application in final orders to reflect the request for an amendment made at the hearing on 4 June, 2010, such amended application be filed and served by 4:00 pm. on 18 June, 2010. 

6. That the application of the wife and the response thereto of the husband together with the response of the second respondents filed 26 May, 2010 and the reply of the husband filed 31 May, 2010 otherwise await a final hearing before a judge on a date to be fixed by the registrar. 

IT IS CERTIFIED

1. That pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel including senior counsel.

IT IS NOTED that publication of this judgment under the pseudonym Sora & Sora and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 4287  of 2007

MS SORA

Applicant

And

MR SORA

Respondent

And

T SORATIS
S SORATIS
C SORATIS

Second Respondents

M PTY LTD

Third Respondent

REASONS FOR JUDGMENT

1. These are interlocutory proceedings between Mr Sora (“the husband”), Ms Sora (“the wife”), T, S and C Soratis (“the second respondents”) and M Pty. Ltd. (“the third respondent”). 

2. The second respondents are the widow and children of the husband’s late brother.

3. The third respondent is a company connected with the second respondents.

4. The husband seeks the removal of the second and third respondents who were joined to the proceedings by the wife.  The husband says that because of the orders sought by the wife as against him, and as a result of the position that he has now adopted, there is no basis for either of the second or third respondents to remain in the proceedings. 

5. The applicant wife seeks the retention of the second and third respondents in the proceedings maintaining that they are necessary to enable the wife to have her case properly determined as the respondents may be affected by orders that she seeks.  She resiled from her earlier written position set out in her application and sought to amend the orders sought.  That amendment was opposed by the husband but I propose to grant it. 

6. Perhaps ironically, the second and third respondents want to remain as parties to these proceedings.  They say separately that they may be affected by orders as between the husband and the wife.  However, they have also filed an application seeking orders themselves, the jurisdiction of which is contentious. 

7. Unfortunately, the interlocutory dispute is hard to follow and some of the more subtle issues between the parties are hidden. 

8. Albeit that some of the facts are contentious, what follows are findings I can make on what appears to be undisputed evidence. 

9. Obviously, the husband and wife are married to each other.  The husband’s late brother and the husband were partners in a business in the mid 1970s.  It was known as “P Business”. 

10. The partnership became a “company/trust” structure in about 1980.  The family trust known as the Sora Family Trust was settled by Deed of Settlement.  The husband and his late brother were joint appointors and joint guardians of the trust.  The trustee was and remains P Company. 

11. There appears considerable conjecture as to whether the formal structure embodied the intentions of the husband and his late brother.  That is a matter that may have to be determined at a future time. 

12. In 2000, the husband’s brother was killed and his widow became a director of P Company with the husband.  A variety of share structure arrangements followed. 

13. The wife initiated proceedings in this court.  On 16 February, 2010 she filed an amended initiating application in which the second and third respondents were joined by virtue of being named in the application.

14. As against the husband, the wife sought an order that the husband and wife retain 50% of “the overall matrimonial assets and financial resources”. 

15. Further, the wife sought an order “so as to satisfy” her entitlement and “at the husband’s election” that the husband pay to her a cash sum equal to 50% of the agreed “matrimonial pool” less what she had retained or that the husband and wife realise the parties’ interests in all of the corporate entities and all assets held personally by them with the ultimate division of the proceeds equally. 

16. Insofar as it is relevant, by an Application in a Case filed 16 April, 2010, the husband sought an order that the wife’s application to realise assets be “summarily dismissed”.  The application included an order that the second and third respondents should acquire the interests of the husband and the wife, or alternatively that the second and third respondents join with the husband and wife to dispose of the interests of the husband and the wife, be “summarily dismissed”.  It was clear from the submissions of senior counsel for the husband that it was a dismissal rather than a summary dismissal that was sought. 

17. The underlying approach of the husband was to seek a dismissal of those parts of the application which required the involvement of the second and third respondents. 

18. In his affidavit in support of the application, the husband set out that the wife was seeking 50% of the agreed asset pool or only orders against the second and third respondents in the event that he elected to realise the assets rather than pay her out in cash.  He said he did not want to sell the interests in the corporate assets that he held in structures with the second and third respondents and hence, did not “elect” to realise those interests.  Rather, he would pay the wife cash.  He said he had the capacity to pay the wife her entitlements without any alteration to the corporate interests or the interests of the second and third respondents. 

19. Leaving aside cash monies immediately available, the husband said that he and his accountant had made enquiries of his bank and he was informed by the accountant that the bank had stated that they would assist him in providing funds with only his personal guarantee and security over his assets, without the involvement of the second and third respondents.  He said that he was going to be seeking an order to make the payment of the wife’s entitlement on terms over a period of three years by payments of $500,000 every six months with interest. 

20. He said he was confident that he could meet the claim that the wife was making notwithstanding he disputed the quantum.  In addition, he said that his sisters and brother had agreed to offer “supplementary freehold security” to assist him in obtaining a loan from the bank.  I am not entirely sure why that was necessary having regard to his evidence that the bank manager would assist him in providing funds with only his personal guarantee. 

21. The vagueness of the husband’s evidence about what funding was available to him was explained by senior counsel for him on the basis that he did not know how much the pool was, nor what entitlement the wife currently had and therefore it was impossible for him to say what sum would be needed to be borrowed. 

22. The nub of the husband’s position therefore was that because the interests of the third parties were not affected by the division between he and the wife and he could fund payment to her, there was no basis for the third parties to be involved.  He said that therefore the application for orders which would involve the third parties, should be dismissed. 

23. The husband’s submission was predicated on the election referred to.  He maintained he was not going to make such an election because he did not need to do so. 

24. Mr. Sweeney of counsel on behalf of the wife indicated that prior to the court commencing, his client intended to seek an amendment to the orders sought to remove the reference to the election.  This apparently had not been mentioned earlier that the start of the hearing.  He then proposed the amendment.  It was opposed by Mr. Bartfeld Q.C. for the husband. 

25. Rule 11.10 of the Family Law Rules 2004 says that a party may amend an application within 28 days after the final resolution event or at any later time, with the consent of the other parties or by order of the court. The dictionary to the Rules defines the final resolution event in a property case as the conciliation conference. In this case, a conciliation conference was held on 8 April, 2009. Twenty-eight days has therefore elapsed and the wife needs the consent of the court.

26. Senior counsel for the husband relied upon the authority of Aon Risk Services Australia Limited  v.  The Australian National University (2009) HCA 27. That decision has limited application in this case. Aon made clear that in determining an application about an amendment, the court is entitled if not obliged, to take into account other litigants in the court’s system as well as the parties to the proceedings in question. Gummow, Hayne, Kiefel and Bell JJ. (at para.98) said:

    [o]f course a just resolution of proceedings remains the paramount purpose (of the Rule) that what is a “just resolution” is to be understood in the light of the purposes and objectives stated.  Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings.  This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and cost are taken into account.  The Rules’ reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution.  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. 

27. It is apparent in this case that the parties are still a considerable way from trial. No prejudice is caused to the husband by permitting the wife to make her position different if not clearer, from what she had originally claimed. The wife’s application may very well have set the husband on a pathway that gave rise to these applications but it must be remembered that this is an application under s.79 of the Family Law Act 1975 (Cth) (“the Act”) and in due course, the court is obliged to make an order only if it is just and equitable to do so. To preclude the wife from pursuing an amendment at this early stage may preclude the court from making an order which is just and equitable. Whilst Chapter II of the Family Law Rules 2004 appears strict, it gives the court the discretion to do what is right. That discretion gives rise to considerations as to whether it is proper to allow the wife to pursue a slightly different course. The Rules are there for the purposes of case management and the objectives of case management are clearly set out in Chapter 1 of the Rules. Ultimately therefore it is a question of whether or not justice can be obtained by refusing to allow the amendment. It my view it cannot and accordingly I propose to allow it to be made.

28. The amendment to the wife’s application is not the end of the matter.  Rule 6.02 requires that a court must include as a party to the case, a person whose rights may be directly affected by an issue in that case where it is anticipated that participation of that party is necessary for the court to determine all issues. 

29. The husband’s position was that the court could rely upon his evidence to show that the second respondent and the third respondent no longer needed to be parties because he could obtain the necessary funds.  That evidence is at best vague.  In disputed circumstances such as this, there is no corroborating evidence. No bank letter setting out any limit or time was provided.  Significantly, there is still a dispute between the husband and the wife as to the timing of the payment.  The husband made clear that he would be seeking payments by instalments.  That is not the wife’s position. 

30. By response filed 26 May, 2010 the second respondents and the third respondent sought orders that the court declare that the husband and/or the wife are entitled in equity to one-half of the net assets of Sora Family Trust.  In the alternative, slightly different orders were sought but of the same nature. 

31. The third respondent, M Pty. Ltd., does not seek any orders. 

32. Mr. St. John S.C. on behalf of the second respondents and the third respondent pointed to the fact that M Pty. Ltd. is a company controlled by the second respondents.  As I mentioned earlier, it is the trustee of their family trust.  It is a stand alone company.  The third respondent has an interest as a tenant in common with the husband in a property in N valued at something in the vicinity of $600,000.  It however, is also the holder of an interest as a tenant in common with F Pty. Ltd., which is the trustee of a family trust controlled by the husband. 

33. These various entities have legal interests in the purpose-built factory property worth in excess of $6,000,000 from which the business operates. 

34. Mr. St. John S.C. observed that the third respondent would therefore be affected by orders sought as between the husband and the wife.  Mr. Bartfeld Q.C. on behalf of the husband observed that as tenants in common, if there was a partition necessary, all of that could be undertaken at VCAT.

35. Whatever might be able to be done, the difficulty in this case highlights the complexities of the inter-woven relationship between all of the parties.  They may or may not be involved at the trial.  In my view Rule 6.02 must be read widely because it refers to rights which “may” be directly affected.  It would be premature therefore to remove the third respondent. 

36. Mr. Bartfeld Q.C. said that the husband would say that he and the wife own one-half of the interests in the various entities.  That, according to Mr. St. John S.C., was not entirely the way the husband, through his lawyers, had been approaching the issue.  Subsequent to the proceedings before me on 12 April, 2010, the second respondents and the third respondent served a Notice to Admit Facts on the husband.  A variety of assertions were made requiring comment by the husband but the underlying theme was that the parties were seeking an acknowledgement by the husband that they owned a one-half interest in these trust assets.  By letter dated 18 May, 2010, the solicitor for the husband responded by saying that the husband disputed each and every fact alleged in the Notice to Admit.  According to Mr. Bartfeld Q.C., that course was undertaken because the husband did not want to make admissions in case there was other litigation involving the second respondents and the third respondent in some other jurisdiction.  Tactical manoeuvrings in this case make it clear that I should take a cautious approach at this point of the litigation and say that until the trial begins, the second respondents and the third respondent are entitled to presume that their position is open to challenge notwithstanding the instructions that Mr. Bartfeld Q.C. conveyed to the court. 

37. The problem does not end there. 

38. One of the murky contentious issues in this case is the assertion about the trust assets ownership.  If Mr. Bartfeld Q.C.’s instructions become the reality, the second and third respondents may have nothing to concern themselves with, but at this point, they are seeking clarity.  They tentatively put their position on the basis that the structure does not represent the original intentions of the husband and his late brother.  Mr. St. John S.C. observed that when the trust deeds were drawn, there may simply have been a mistake made.  That was because the brothers treated the business as a partnership.  Mr. St. John S.C. rhetorically asked how a court could make the declaration pursued by any of the parties that the husband and wife owned 50% of the trust.  He asked how the husband would secure his obligations having regard to the fact that the trust was the overwhelming part of the wealth for division if there was to be an instalment plan to pay out the wife.  Could the husband secure the debt over the whole of the trust estate or just part of it?  Mr. St. John also observed that there is a significant quantum dispute in which he said the husband wanted to pay the wife something in excess of $3,000,000 and the wife was seeking $18,000,000. 

39. All of these matters go back to the observation I earlier made about the fact that the second respondents and the third respondent may very well be affected directly by orders being pursued by the wife, let alone the husband. 

40. There was also discussion about the nature of the application for orders brought by the second respondents. Mr. St. John S.C. said that his clients were seeking to rely on s.78 of the Act and the authority for its use was Lanceley (1994) FLC 92-491. That and other authorities of this court have traditionally taken the view that where third parties are either joined or on notice of orders pursued, they are bound by declarations of the court. The unresolved question, and one that I do not have to determine now, is whether the court has a power to entertain an application for a declaration by the third parties based on s.78. Mr. Bartfeld Q.C. suggested the third parties were asking the spent some considerable time looking at the issue of the court to exercise its accrued jurisdiction. It would not be possible for me to presently see that as a prospect because there is no statement of claim from the second respondents or the third respondent, nor is there any information in the affidavit filed by or on their behalf which would enable a “defence” to be drawn by anybody who was opposing the orders that they were seeking.

41. Mr. St. John S.C. made clear that his clients were not at this stage, pursuing the accrued jurisdiction but in the event that they ultimately decided to or had to do that, a statement of claim would be necessary to enable the court to understand what jurisdiction it was being asked to exercise. 

42. The husband argued that what the wife was really doing was shoring up her position and using the joinder power for enforcement purposes. It is clear that the powers in Part VIII AA are not open for enforcement purposes and die when the s.79 power is exhausted. Mr. St. John S.C. on behalf of the second respondents and the third respondent denied that, at least from his clients’ perspective, this was an enforcement application but rather one of implementation. Mr. Sweeney on behalf of the wife similarly argued that for the husband to persist with the claim for payment on terms, required a fixed or floating charge and that in itself required the assistance of the second respondents. Similarly, by way of default orders if that was necessary, the husband and/or the wife may need the power and control over the second respondents and the third respondent to implement its order. As such, their rights may very well be affected.

1. In the circumstances, I find that it is necessary for the second respondents and the third respondent to remain parties to these proceedings at this point in time. 

2. Having regard to the lateness of the day, there were no questions of costs argued.  If a party seek orders other than reserved costs, they will need to do written submissions. 

I certify that the preceding Forty Four (44) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  10 June 2010