Southwell and Jane (No 2)
[2011] FamCA 734
•20 September 2011
FAMILY COURT OF AUSTRALIA
| SOUTHWELL & JANE (NO 2) | [2011] FamCA 734 |
| FAMILY LAW – Joinder of a Third Party after a case has begun – If a requirement of the Court is that a statement of claim is to be filed, is it just the pleading that should determine the joinder or is it the extensive evidence? |
| Civil Procedure Act 2010 (Vic) Family Law Act 1975 (Cth) Federal Court of Australia Act 1976 (Cth) |
| B Pty Ltd & Ors v K & Anor [2008] FamCAFC 113 Beck and Beck (2004) FLC 93-181 Custodio v Pinto & Ors (2006) FLC 93-279 Dey v Victorian Railways Commissioners (1948) 78 CLR 62 General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 Lindon v Commonwealth of Australia (No 2) (1996) 136 ALR 251 Moore v Lawson [1915] 31 T.L.R. 418 Pelerman v Pelerman (2000) FLC 93-037 Webster v Lampard (1993) 177 CLR 598 |
| APPLICANT: | Mr Southwell |
| RESPONDENT: | Ms Jane |
| 2ND RESPONDENT: | Southwell Investments Pty Ltd |
| FILE NUMBER: | MLC | 1893 | of | 2007 |
| DATE DELIVERED: | 20 September 2011 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | CRONIN J |
| HEARING DATE: | 12 September 2011 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Bick QC with Mr Thompson |
| SOLICITOR FOR THE APPLICANT: | Taussig Cherrie Fildes |
| COUNSEL FOR THE RESPONDENT: | Mr Wood |
| SOLICITOR FOR THE RESPONDENT: | Pinto Law |
| COUNSEL FOR THE 2ND RESPONDENT: | Mr Riordan SC with Mr Strum |
| SOLICITOR FOR THE 2ND RESPONDENT: | Middletons |
Orders
That Southwell Pty Ltd be joined as a party to the proceedings.
That all extant issues be listed as soon as practicable for directions as to the resumption of the trial.
IT IS NOTED that publication of this judgment under the pseudonym Southwell & Jane (No 2) 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 MELBOURNE |
FILE NUMBER: MLC 1893 of 2007
| Mr Southwell |
Applicant
And
| Mr Jane |
Respondent
Southwell Pty Ltd
(2nd Respondent)
REASONS FOR JUDGMENT
By application filed 14 June 2011 Ms Jane (“the wife”) sought to join Southwell Pty Ltd (“the company”) as a party to property proceedings involving Mr Southwell (“the husband”).
The application was filed as a result of orders I made on 1 June 2011. The application is opposed by the company.
The company is the trustee of a family discretionary trust known as Southwell Trust (“the trust”). The directors of the company are the husband’s parents. The husband along with his siblings and parents, is a beneficiary of the trust.
The present dispute giving rise to the joinder issue arose during the running of the final hearing of the property proceedings between the husband and the wife. The Court needs to determine whether the husband has a loan account in his favour in the trust which has stood at $215,000 without earning interest and without being varied in the books of accounts for about 16 years and which must therefore be added to the pool or whether it is a significantly greater sum by virtue of a number of contractual and/or equitable principles. The latter, if found to be the case, may require the trust to disgorge significantly more than $215,000 if that sum was to be added to the pool for division between the husband and the wife.
To the extent that the trust has a capital value, its balance sheet showed unpaid present entitlements of beneficiaries of over $6 million. As such, if the wife’s assertion is correct, the balance sheet would need to be reconsidered and the beneficiaries of the loan accounts might have a complaint about their entitlements being altered. Those are matters yet to be determined.
As a result of the orders I made in June, the wife provided a statement of claim asserting a cause of action against the company. The company submitted I should effectively summarily dismiss the wife’s application.
The wife relied upon a brief affidavit filed 14 June 2011 in which she set out her limited knowledge of the existing circumstances giving rise to the entitlement of the husband in the trust of $215,000. Having referred to the length of time that the loan account had stood unaltered, the wife said she relied upon evidence of her expert in an affidavit sworn 17 January 2011 as to “the calculation of the expected return” to the trust from the capital remaining where it was. Although the expert’s evidence was only briefly referred to in submissions, I have looked at the affidavit to which the wife referred but I was unable to find any such calculation. Notwithstanding that, I do not think the absence of that evidence affects my determination. It must be said however that the evidence relied upon by the wife did little to assist me and it was to her counsel’s submissions that I turned for a resolution of the issue. The affidavit of the wife was, in reality, directed to the question of her pursuit of an entitlement to call an adversarial witness which, it was agreed, was not an issue I needed to determine that day. It remains an outstanding issue.
The company relied upon a much greater affidavit of one of its directors, the husband’s father, filed 8 September 2011 denying that anything other than the husband’s loan without interest existed and acknowledging the debt of $215,000. Attached to the affidavit were voluminous financial documents showing how the company in its capacity as the trustee of the trust had dealt with its money for many years. The focus of this affidavit was on rebutting the wife’s assertion. The evidence demonstrates the way the loan has been treated for many years. The question is whether the wife can produce some further evidence to show that all is not what it seems or that some inference of fact or law can be drawn from what seems to currently be the evidence.
With that dilemma and on that evidence, the question arises as to the basis and necessity of joining the company. Clearly, if the entitlement of the husband is only $215,000, the trust could meet the obligation without difficulty.
The starting point in this case is to note that when it was possible to do so, the wife did not join the company in the initiating application. That gave rise to the necessity for the application now. There are trial issues yet to be determined about the consequences of such a joinder and the parties have indicated that if the joinder is made, those issues will be the next to be considered.
Rule 6.02 of the Family Law Rules 2004 says that a party is necessary for the proceeding if their rights may be directly affected by an issue in a case and where their participation as a party is necessary for the Court to determine all issues in dispute. If those matters are satisfied, the person must be included as a party in the case.
Looking at the matter in reverse order, the company’s position as set out in the written submissions of its counsel Mr Riordan SC and Mr Strum was that the approach the Court should take was that of a summary dismissal application. It was submitted that the wife’s claim was unspecified. That being so, it was not proper to make the joinder of the company merely on the basis that facts and assertions now made and unsupported by evidence, may be proved at trial.
Counsel set out the basis upon which a joinder application should be granted. Much of that was uncontroversial. It was submitted that the particulars attached to the material facts in the wife’s statement of claim would not support any agreement that the trust had to pay interest on the $215,000 nor show that there should have been an investment of the money in a separate trust for the husband requiring the payment to him of a proportion of any profit. It was submitted that the allegations as pleaded in the wife’s statement of claim would not give rise to an agreement at all. Mr Riordan took the Court through the evidence of the husband and his father as it had already been given and in particular, examined the cross-examination of both and then pointed to the accounts of the trust to show the way in which this loan had been treated for many years. It was submitted that the circumstances of the family arrangements and the recordings in the books of accounts were entirely consistent with the evidence that this was an interest-free loan. It was also submitted that it was significant that the money that went into the loan account had been provided to the husband by his parents in the first place consistently with the way in which the family conducted its financial arrangements. It was therefore submitted that there could not be any contractual arrangement to support the wife’s material facts.
Mr Riordan then submitted that the wife’s claims for and in relation to, equitable relief, by way of a constructive trust or unjust enrichment, had been pleaded in the statement of claim but those claims were unspecified and predicated on the existence of an agreement in the first place.
The company’s position was also that any putative claims against the trust, were hopelessly statute barred.
The company’s argument was succinctly set out in the outline of submissions to which I have not done justice by the foregoing paragraphs but I have taken all of the matters into account.
Mr Bick QC on behalf of the wife submitted that the Court did not have to pore over the evidence to decide the issue of the joinder. He submitted that the exercise as undertaken by the Company’s counsel, was completely irrelevant. The wife’s position was that all she had to do was to set out in a statement of claim, the facts which gave rise to one or more causes of action and that there was no requirement for an inquiry into what might or might not be proved at trial.
In relation to the company’s submission that the material facts were unsupported, Mr Bick submitted that it was not just the particulars that were relied upon. The wife’s position was that all of the facts could only be considered when all of the evidence was completed and that at this point in the process, that had not occurred. Mr Bick’s submission was that the pleading threw up the issues and so long as there were sufficient facts pleaded, a joinder order was justified.
In the reasons for judgment I gave on 1 June 2011, I referred to B Pty Ltd & Ors v K & Anor [2008] FamCAFC 113. That decision is again relevant. There, the Full Court drew attention to what was said by Kirby J in Lindon v Commonwealth of Australia (No 2) (1996) 136 ALR 251 about summary dismissals but also what Barwick CJ said in General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 at 130. The Full Court referred to both of those decisions without expressly stating that they applied in cases relating to joinder. What Kirby J said in Lindon (supra) was that if there was a serious legal question to be determined, it should be determined at a trial where the facts were obviously under scrutiny whereas Barwick CJ in General Steel (supra) said that it may be necessary for the defendant to demonstrate that the plaintiff’s case was “so clearly untenable” that it could not possibly succeed. In B Pty Ltd v K, the Full Court said that it was impossible, based on the material provided in that case, to identify what the facts were that were material to the cause of action. A reference to “material” in a court which does not rely upon pleadings would normally be the affidavit material. In this case, I have the pleading. In B Pty Ltd v K, the Full Court thought it necessary for there to be such a pleading. It may therefore be instructive to look at other jurisdictions.
Traditionally, summary dismissal applications were determined on the pleadings (Dey v Victorian Railways Commissioners (1948) 78 CLR 62) but there have been sufficient changes in procedure (such as Chapters 22 and 23 of the Supreme Court (General Civil Procedure) Rules 2005) to indicate that courts examine affidavit material as well as pleadings. In this Court, it is the usual practice to determine such matters on the evidence (see Custodio v Pinto & Ors (2006) FLC 93-279).
The Federal Court of Australia position arising from s 31A of the Federal Court of Australia Act 1976 (Cth) is that summary judgment can be given where there is no reasonable prospect of success (emphasis mine). The Victorian position in the Civil Procedure Act 2010 (Vic) is slightly different in that it refers to no “real prospect of success”. In each of those cases, the full extent of the evidence is presumably unknown when an argument about the pleading occurs.
I think it is sufficient to consider the allegations in the pleading and on what is asserted (as distinct from what might ultimately be proved). The applicant needs to show there is a reasonable cause of action to which the respondent can plead in reply.
The unusual feature here is that (having regard to what I earlier said about the expert’s evidence) all I have from the wife is the pleading and the evidence from the part-heard proceeding. It is usual but it seems to me not absolute, to look at only what the respondent to the application (for summary dismissal) asks the Court to consider. The wife asked me to determine the matter on the basis of the pleading bearing in mind this is a case involving a claim against a party other than a party to the marriage. Accordingly, and with some hesitation, it occurs to me that I can take the Dey v Victorian Railways Commissioners approach.
The principles relating to summary dismissals indicate the relief is rarely and sparingly provided (see Pelerman v Pelerman (2000) FLC 93-037), a weak case or one that is unlikely to succeed is not sufficient to warrant termination (Beck and Beck (2004) FLC 93-181 citing a number of other authorities) and importantly, is there an issue, including a legal question, to be tried?
Drawing into the determination, all of those questions, the issue is whether there is a dispute here that might be justifiably determined at trial where all of the evidence can be tested and importantly in this case, submissions can be made.
I think the language of Rule 10.12(d) of the Family Law Rules 2004 is a helpful guide but I am mindful that that particular rule applies in the case where someone is already a party. Its usefulness lies in the language which is used which is that there is no reasonable likelihood of success. Reasonableness is a very subjective issue.
Can I for example, say that the claim of the wife is not maintainable? Bearing in mind what Kirby J said in Lindon (supra) it would be difficult to do so. Can I find that on the law, there is no prospect of success or no reasonable prospect of success in relation to any of the matters pleaded? Again, the evidence is not closed and the Lindon concept should prevail. I am mindful of the fact that I have not heard submissions as to whether inferences could be drawn from the evidence in any particular way.
The unusual feature of Part VIII of the Family Law Act 1975 (Cth) (“the Act”) is the Court’s requirement to ultimately only make an order dividing property of parties in circumstances where the Court is satisfied that it is just and equitable to do so. For a party to be denied an opportunity to pursue evidence where the Lindon test is applied may lead to a concern by that litigant that a just and equitable outcome has not been achieved. The common law decisions of the past have for many years expressed concern about depriving someone of the opportunity to establish their pleaded cause of action (see Webster v Lampard (1993) 177 CLR 598 at 603; General Steel Industries Inc v Commission for Railways (supra); and Moore v Lawson [1915] 31 T.L.R. 418)
Mr Riordan referred to the general discretionary considerations including the lateness of the joinder application, the effect on the conduct of the proceeding and the prejudice to the parties. All of those matters might sway the discretion in favour of the company but I think I also have to consider the problem to which I earlier referred arising out of s 79 of the Act. It seems to me that whilst there is a prejudice to the company, to a very large degree, that can be ameliorated by an order for costs in due course if the wife does not prove the allegations set out in her statement of claim. The significance of the issues raised by the joinder cannot be overstated having regard to what appears to be an argument about a capital disparity of a significant amount. In those circumstances, I think the discretion should be exercised in favour of the wife. Accordingly, the company should be joined as a party.
That then gives rise to the problems of the procedures hereafter and as agreed between all counsel, the matter should be fixed for those issues to be contemplated. I propose to hear the parties in respect of that.
I certify that the preceding Thirty (30) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 20 September 2011.
Associate:
Date: 20 September 2011
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