Southwell & Jane

[2011] FamCA 663

FAMILY COURT OF AUSTRALIA

SOUTHWELL & JANE [2011] FamCA 663

FAMILY LAW - PRACTICE AND PROCEDURE – Joinder – Where the respondent wife sought to join the corporate trustee of a discretionary trust – Where there was disagreement as to the value of the husband’s interest in the trust – Whether the corporate trustee was afforded procedural fairness – Where the joinder of the corporate trustee was sought by the wife late in proceedings – Whether the corporate trustee should be joined    

Evidence Act 1995 (Cth)
Family Law Act 1975 (Cth), s 90AE
Family Law Rules 2004 (Cth), rr 6.02, 6.03, 15.51, 15.52

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
B Pty Ltd & Ors v K & Anor [2008] FamCAFC 113
Banque Commerciale SA v Akhil Holdings Ltd [1990] 169 CLR 279
Bergman v Bergman [2009] FamCAFC 27
Cales v Cales (2010) FLC 93-459
Carborundum Realty Pty Ltd v Raia Archicentre Pty Ltd & Ors, Supreme Court of Victoria, Causes List, No. 8708 of 1991, 2 June 1992
Dillion v Nash [1950] VLR 293
Gould v Gould; Swire Investments Ltd (1993) FLC 92-434
Hunt v Hunt & Ors (2007) 36 FamLR
Pencious v Pencious [2010] FamCA 605
Puddy v Grossvard & Anor (2010) FLC 93-432
The Liquidator, S Pty Ltd v Rand [2010] FamCA 646
Toomey v Scolaro’s Concrete Contructions Pty Ltd (In Liq) & Ors [2001] VSC 96
Warby v Warby (2001) 116 FLR 319
Wayne & Dillion & Dillion [2008] FamCAFC 204
Yen v Yen [2010] FamCA 1

APPLICANT: Mr Southwell

RESPONDENT: Ms Jane

FILE NUMBER: MLC 1893 of 2007

DATE DELIVERED: 1 June 2011

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 5 April 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 SOUTHWELL INVESTMENTS PTY LTD: Mr Riordan SC with Mr Strum

Orders

1. That paragraph 8 of the wife’s further amended response filed 4 February 2011 is dismissed.

2. That any application in a case further seeking to join any third party should be filed and served within fourteen days along with a statement of the claim against that proposed third party.

3. To the extent that the wife wishes to proceed with paragraph 9 and 10 of the further amended response filed 4 February 2011, those matters should not be listed for hearing until:

   (a)the determination of any application brought pursuant to paragraph 2 hereof; and

   (b)the wife has filed and served appropriate supporting material to satisfy the requirements of Chapter 15 of the Rules.

4. That any application for costs arising out of these orders be listed before me at a time arranged between the parties and my Associate.

IT IS NOTED that publication of this judgment under the pseudonym Southwell & Jane is approved 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

Ms Jane

Respondent

REASONS FOR JUDGMENT

1. On 24 January 2011 the property proceedings between the husband and wife commenced. On 3 February 2011, on the fourth day of the trial and at a point where both husband and wife had given evidence and had been cross examined, an issue arose as to whether it was necessary to join Southwell Investments Pty Ltd (“the corporate trustee”) in its capacity as trustee of Southwell Family Settlement B (“the discretionary trust”) as a party.

2. The wife conceded that the joinder was necessary because of the possibility of having to enforce orders that might arise out of the property proceedings.

Background giving rise to the dispute

1. Southwell Investments Pty Ltd is the corporate trustee of the Southwell Family Settlement B which is a discretionary trust of which the applicant husband is a beneficiary. The husband’s parents are the directors of the corporate trustee. Loosely described, this is the husband’s parents’ family trust.

2. The year 1989 was significant in this dispute. The parties were married in 1989. Also in 1989, the husband received a distribution from the discretionary trust. He used some of the money for the benefit of the parties and lent the balance, a sum of $215,247, to the discretionary trust.

3. On the evidence thus far, it would seem that the loan was recorded in the books of account of the discretionary trust and has remained so ever since. On the face of the trustee’s documents, that amount appears not to have altered or, in other words, has not accrued interest and the capital debt has neither increased nor decreased.

The parties’ positions at trial about the $215,247

1. During the trial, the husband contended the discretionary trust owed him the capital sum and no more. The wife contended the $215,247 was a loan by way of a twenty one year investment entitling the husband to an amount far in excess of the capital sum, including interest on the sum, and that it should be subject to valuation by the Court as part of the financial proceedings. That was not always the position put by the wife.

2. In the husband’s outline of case filed for the commencement of the January trial, he asserted that the debt was $215,247 and declared that amount to be the asset to be added to the pool for division. When the wife filed her outline, the amount was not disputed. Indeed, the debt had been the subject of consideration by a court ordered single expert witness Mr M. Counsel for the husband noted during the hearing that this debt was one of the very few points of agreement between the expert evidence of the single expert witness and the “shadow expert” of the wife, Ms P. This dichotomy of views gives rise to part of the problem about the evidence.

The question of joinder of the corporate trustee arises in the trial

The husband’s position

1. Counsel for the husband referred to paragraph 3 of an affidavit of the “shadow expert” of the wife in which she deposed that she had formed the view that the husband’s share in the discretionary trust equated to $2.61 million. It was submitted that the new position raised by this affidavit filed 3 February 2011 was substantially different to the previously agreed position and that if the wife intended to adopt this position at trial it should have been made apparent to the husband and that notice should have been given to the corporate trustee of the discretionary trust as orders in the proceedings could gravely affect the trustee’s rights.

The wife’s position

1. Senior counsel for the wife pointed to the evidence of single expert Mr M about the value of the husband’s entitlement in Southwell Family Settlement B. Mr M had said that the entitlement was $215,247 and noted that this had been the case “for several years”. The wife’s position was that the value was a matter for judicial determination and the corporate trustee’s views were irrelevant to the decision to be made by the Court.

2. On the question of the timing of the valuation dispute, senior counsel for the wife submitted that substantial evidence in relation to the discretionary trust had been placed before the Court in the form of; two affidavits sworn by the wife prior to trial, the subpoenaed accounts of the discretionary trust, the trust deed and other documentation “in respect of the trustee”. It was argued that the evidence of the husband, and the husband’s father (who was said to be the “controlling mind of the trustee”) under cross examination on the second day of trial, resulted in concessions that suggested the husband was entitled to an amount in excess of $215,000. The evidence of the husband and of his father which came from cross-examination by senior counsel for the wife, was that the money lent had been mingled with the other invested funds of the discretionary trust. This, it was submitted by senior counsel for the wife showed that the evidence before the Court contradicted the husband’s contention that the sum was a loan to the discretionary trust. Having regard to the stage reached, I was not then and am not now in a position to make such a finding.

3. It was submitted during the trial that the discretionary trust may need to be joined to the proceedings for the purposes of enforcement in the event that the husband’s entitlement in the discretionary trust was found to be in excess of the sum of $215,247. That gave rise to the trial being adjourned.

The dilemma arises

1. The distinction between the parties’ positions was stark. If the husband is correct, the amount to be added to the pool of assets for division is $215,247 and as such, because of the other assets of the parties, there would appear to be little or no need to join the corporate trustee. If the wife is correct, it may be that joinder is necessary because the assets of the discretionary trust would be significantly reduced, particularly as the wife asserted that the loan, as an asset, was worth about $2.6 million thereby potentially affecting other beneficiaries as well as affecting the corporate trustee’s capacity to fulfil obligations it may see itself as having.

2. A number of difficulties immediately arise from the matters above. For example, is there any admissible evidence of a $2.6 million value? Is it necessary for that evidence to be adduced before joinder or is it sufficient to foreshadow it? Is there any extant recognisable claim against the corporate trustee even if it were joined? Is it necessary for there to be a claim or is it sufficient for the joinder to occur simply to give efficacy to the enforcement of orders?

The Rules of Court

1. Rule 6.02(1) of the Family Law Rules 2004 (Cth) (“the Rules”) provides that a person whose rights may be directly affected by an issue in a case, and whose participation as a party is necessary for the court to determine all issues in dispute in the case, must be included as a party to the case. To the extent that the person referred to in the Rules is the corporate trustee, it was not suggested until after the trial began that joinder was necessary.

2. Rule 6.03(2), which was the applicable rule at the relevant time, provides that a party may add another party after a case has started by amending the application and serving the newly named party. However, rule 11.10 relevantly provides that such an amendment could only occur with permission of the court if it is sought after the case had been allocated the first day before the judge. Notwithstanding the fact that an amended application was filed by the wife, the requisite leave had not been given to simply add the new party. Hence, the wife’s application to join the corporate trustee after the commencement of the trial.

3. There are also difficulties in the wife relying upon evidence which may not yet be adduced. Rule 15.51(1) provides that a party must apply for the court’s permission to tender a report or adduce evidence at a hearing or trial from an expert witness, except a single expert witness. The concept of the “shadow” expert has crept into the lexicon because litigants have often had their own professionals watching or “shadowing” the work of the single expert witness. In the event that there is disagreement, the provisions of rule 15.52(1) might then be applied.

4. On 5 July 2010, I made the following orders (noting they were by consent of the parties):

   (18)That the wife provide to the husband’s solicitors any report from her “shadow expert” upon which she would seek to rely (“the report” by 9 August 2010).

   (19)That any objection by the husband to the admission into evidence of the report be made by 27 August 2010.

   (20)That in the event of objection by the husband to the report, the wife file any application for leave to call the shadow expert by 3 September 2010.

5. By agreement between the parties, those orders were extended by Registrar Mestrovic on 30 August 2010 but I note that (18) was altered to read “upon which she would seek leave to rely” (emphasis mine).

6. It is not at all clear whether the “leave” was ever sought or whether any objection was raised by the husband to the shadow expert’s report.

7. When the matter was listed before me on 26 November 2010, the shadow expert was described as “the wife’s adversarial witness [Ms P]” but that may have been a misunderstanding by everyone that day.

8. There was some discussion about the issue on 3 February 2011 (see p.309 of the transcript) which seems to show that no leave to adduce the evidence about the $2.6 million was ever sought or given.

9. When she filed an amended response on 4 February 2011, the wife sought the appointment of a forensic accountant to be appointed as a single expert “to value the husbands (sic) entitlement in the Southwell Family Settlement B”. That issue has not been argued or determined.

10. There is no doubt that even if the evidence of Ms P is sought to be adduced or that a forensic accountant as foreshadowed, is to be engaged to pursue the issue, legal and factual questions arise as to the nature of the debt owed to the husband by the trust. I return to that below.

11. All of this gives rise to the immediate problem about the state of the evidence but also whether there is a difficulty in joining a party who has not participated in the proceedings thus far.

The orders made in preparation for the joinder issue

1. Upon the adjournment of the trial, there was no common position about the joinder issue and on 16 February 2011 I made the following orders at the request of, and with the consent of, the parties:

   1.The further hearing of the wife’s application to join [Southwell] Investments Pty Ltd be adjourned to 5 April 2011 at 10.00am;

   2.On or before 2 March 2011, the wife file and serve:

   (a)a statement of points of claim against [Southwell] Investments Pty Ltd; and

   (b)written submissions in relation to the alleged jurisdiction to entertain that claim and in support of the joinder of [Southwell] Investments Pty Ltd.

   3.On or before 16 March 2011, [Southwell] Investments Pty Ltd file and serve written submissions in reply;

   4.The husband file and serve any submissions in reply by 23 March 2011;

   5.Certify for Counsel, including Senior Counsel for [Southwell] Investments Pty Ltd; and

   6.        Costs reserved.

2. The wife’s statement outlining the points of claim against the corporate trustee and an outline of submissions focussed primarily on the jurisdiction to entertain the claim against the corporate trustee. The points of claim read as follows:

   1.[The corporate trustee] is a corporation duly registered pursuant to the Corporations Act [2001 (Cth)];

   2.[The corporate trustee] is the trustee of [the discretionary trust];

   3.The applicant [husband] and the respondent [wife] agree that the husband is entitled to a sum held by [the discretionary trust] and that the sum is part of the matrimonial asset pool;

   4.The applicant [husband] and respondent [wife] have requested [the Court] to determine the sum and make orders under s 79 of [the Act] dividing the matrimonial property pool of the applicant and the respondent in such a manner as the Court considers appropriate;

   5.The respondent [wife] has joined [the corporate trustee] so as to be bound by such order as the Court may make in relation to the sum including any order the Court may make in relation thereto under ss 79, 81, 90AE(2) and 90AF(2) of the Act.

3. The corporate trustee provided written submissions in reply which opposed the wife’s application to join the corporate trustee and relied on rule 6.04 to remove itself as a party if it was already joined pursuant to rule 6.03. In oral argument, senior counsel for the corporate trustee pointed out that the husband had not “requested” the Court to “determine the sum”.

4. The husband opposed the joinder.

The submissions on 5 April 2011

The wife’s position

1. On 5 April 2011, senior counsel for the wife contended that the power to join the third party arose because of the prospect of the court exercising its powers under s 90AE(2)(a) of the Act or alternatively, in the aid of the exercise of the accrued jurisdiction of the Court. Reference was then made to Warby v Warby (2001) 116 FLR 319. The wife also relied on Bergman v Bergman [2009] FamCAFC 27 at [25]-[27]; The Liquidator, S Pty Ltd v Rand [2010] FamCA 646 at [29]-[33] and Yen v Yen [2010] FamCA 1 at [32]-[37].

2. Reliance was placed on s 90AE(2), which enabled the Court, in proceedings under s 79 to make an order that “directs a third party to do a thing in relation to the property of a party to the marriage” and s 90AE(3) and (4) which set out the considerations a court may contemplate before making orders against a third party. One of those considerations was a requirement that the third party be accorded procedural fairness. It was argued therefore that for the power/s to be exercised, the corporate trustee had to be joined.

3. As for procedural fairness, senior counsel for the wife contended that all that was required was an understanding of the nature of the claim against the corporate trustee and an articulation of what necessitated its involvement in the proceedings. As for proper notice, it was argued that the husband’s father, who was one of the directors and the “controlling mind” of the corporate trustee had given evidence at the trial and was aware of all material facts in the proceedings.

4. Senior counsel for the wife relied on B Pty Ltd & Ors v K & Anor [2008] FamCAFC 113 to assert that what is required to satisfy procedural fairness under s 90AE(2)(c) is a statement of the claim as distinct from a Statement of Claim. He submitted that the points of claim document and outline of submissions filed by the wife satisfied the requirements of procedural fairness. In particular, senior counsel for the wife relied on the statement of the Court in B Pty Ltd v K that “[n]o pleading in the traditional sense is required to identify further facts material to the cause” but that “[s]omething resembling a statement of claim will generally be necessary” in relation to a cause of action against a third party.

5. On the question of the third party not having been part of the four day trial thus far, it was argued that any prejudice to the corporate trustee could be remedied by allowing submissions on the evidence.

6. As for the dispute about whether the amount to be added to the pool of assets was $215,000 or $2.6 million, senior counsel for the wife argued that the value of the sum owed to the husband was an evidentiary matter in issue to be determined at trial.

7. To rebut any criticism of the wife for what was suggested as a late change of position, senior counsel for the wife pointed to the fact that the accounts of the discretionary trust were only provided the day before the cross-examination of the husband and the husband’s father. He said that redacted accounts of the discretionary trust were provided to the wife during discovery and no full accounts were given until the release of material under subpoena. The wife contended that it was at this point that it became apparent to her that the value of the husband’s loan to the discretionary trust may have been greater than that disclosed in the husband’s financial statement and case outline.

The proposed third party’s position

1. The corporate trustee took a number of positions as to why it should not be joined but primarily focused on the ground of procedural fairness.

2. Senior counsel argued it was procedurally unfair to join a party after the trial had commenced and after evidence had been adduced from witnesses, including from the husband, as managing director of the corporate trustee, and the husband’s father, as one of its directors. That meant that evidence was given in a case in which his client was not able to participate.

3. Pointing to the points of claim document of the wife, senior counsel said the corporate trustee was unable to identify the nature of the claim against it. The document did not disclose the material facts on which the claim was founded nor was any order sought by the wife disclosed. Consequently, it was said that the points of claim and submissions did not allow the corporate trustee procedural fairness.

1. As for the submission by the wife that there had been sufficient detail and hence procedural fairness, senior counsel argued that B Pty Ltd v K is authority for the proposition that something resembling a Statement of Claim is required. He relied on Banque Commerciale SA v Akhil Holdings Ltd [1990] 169 CLR 279 at 286 where Mason CJ and Gaudron J said the function of pleadings, and by inference obligation of the litigant, is to set out the case with sufficient clarity to allow the other party to meet it and identify the issues for determination. It was said that this had not occurred and that the wife’s points of claim document was deficient.

2. The issue of the detail of the wife’s claim takes on some importance in this case because, according to senior counsel for the corporate trustee, the Court must first determine the legal rights associated with the amount loaned by the husband to the discretionary trust and then assess the amount due by the trust to the husband as a matter of law and that this process did not involve any valuation. It was argued that the husband’s expectation about his money had to be understood in light of the fact that the husband was also a beneficiary of the trust and had an interest as a beneficiary in addition to his interest as a lender. It was the corporate trustee’s argument that the wife had misconceived the difference between a loan and equity.

3. Senior counsel for the corporate trustee posited that a sum additional to the capital sum lent by the husband to the trust might perhaps arise by way of an agreement, express or implied, based on the intention of the parties at the time of the loan, either in the form of a percentage increase or an implied term for interest. He said it might be that the remedy of unjust enrichment may be available subject to the corporate trustee raising a defence of laches. It was submitted that the wife had not particularised any of these claims.

4. Leaving aside the issue of what the evidence is at present, these arguments also raise the obvious question of whether an accountant is the appropriate person to give expert evidence as to the husband’s entitlement.

5. It was further argued that where no explanation for the delay in bringing the joinder was provided, procedural fairness required a necessary limitation on the late amendment of pleadings and that this was particularly so where such an amendment constituted an abuse of process (see Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at 217). The wife’s reply to that argument is set out in paragraph 29 above and it must be noted that I have not been asked to make any finding in relation to the reasoning behind the redacted documents or delayed production of accounts.

6. The argument was then put by the corporate trustee that absence of a comprehensive statement of the claim and orders sought meant the wife could not simply rely on Part VIIIAA of the Act as the basis to join the entity. Senior counsel pointed to the limitation in s 90AE(2) to alter the rights, liabilities or property interests of a third party because of the legislative use of the words “in relation to a marriage”.

7. In Hunt v Hunt & Ors (2007) 36 FamLR 64 O’Ryan J observed that when “read in conjunction with s 90AE(3), s 79, and Part VIIIAA generally… what is contemplated is not some arbitrary invasion of the rights of a third party but an alteration of those rights where they are sufficiently connected to the division of property between parties to a marriage”. As was said in Puddy v Grossvard & Anor (2010) FLC 93-432, s 90AE contemplates a “re-arranging” [of] established liabilities”.

8. Senior counsel for the corporate trustee contended that the wife had not established that any of the factors set out in s 90AE(3) so as to justify a joinder on the basis of the application of Part VIIIAA of the Act.

9. In response to the wife’s argument about a possible reliance upon an accrued jurisdiction, the corporate trustee agreed that the Court had the power to exercise the jurisdiction if the relevant factors in Warby (supra) were made out but noted that in a number of authorities, the Court had declined to exercise the jurisdiction (see in particular Bergman v Bergman (2009) FLC 93-395; Yen v Yen [2010] FamCA 1).

10. It was then argued that if the corporate trustee were joined, the evidence adduced at trial prior to the joinder would not be admissible as against the corporate trustee and the matter would be required to proceed de novo to avoid prejudice to it. The authorities on this point are not clear or strong. For example, courts have ruled that a newly joined party could insist that only evidence heard de novo on the issues between the plaintiff and himself should be regarded (see Dillion v Nash [1950] VLR 293 at 295, as cited in Carborundum Realty Pty Ltd v Raia Archicentre Pty Ltd & Ors, Supreme Court of Victoria, Causes List, No. 8708 of 1991, 2 June 1992 at p 3) however, there are other decisions that are not wholly supportive of that contention (see Toomey v Scolaro’s Concrete Contructions Pty Ltd (In Liq) & Ors [2001 VSC 96 at [56]-[57]).

11. Senior counsel also argued that s 136 of the Evidence Act 1995 (Cth) precluded the use of the evidence of the husband’s father as it may be unfairly prejudicial to the corporate trustee in circumstances where the husband’s father and the corporate trustee did not have notice of any prior claim against the discretionary trust. That is an issue about which, at this stage, I do not have to rule.

12. All of those arguments gave rise to the corporate trustee seeking to either be discharged under rule 6.04 if it had already been joined (due to being named on an amended response filed by the wife) or simply by a dismissal of the wife’s application. Having regard to what I have earlier said about the Rules, it is only the latter that I need to consider.

The husband’s position

1. The husband opposed the application to join the corporate trustee on the basis that the decision not to join the entity prior to trial was a strategic decision by the wife and the approach to litigation adopted by the wife should not be endorsed by the Court particularly due to the just and equitable considerations in s 79 of the Act. It was argued that the application and issue in relation to the husband’s loan to the discretionary trust could have been raised earlier and any deficiency in the discovery process could have been addressed prior to trial at the interlocutory stage of proceedings given that the husband had filed the initiating application in 2007.

Should the corporate trustee be joined?

1. Following the adjournment on 4 February 2011, the wife filed the further amended response referred to earlier, naming the corporate trustee as a respondent. For the reasons detailed above that required the leave of the Court.

2. In that amended response, the wife also sought that the Court make a declaration as to the value of the husband’s interest in the discretionary trust and, presumably to enable that to be done, that the corporate trustee be joined as a party to the proceedings “for the purposes of enforcement of any orders… made against the husband”.

3. The central question in the application before the Court is whether the discretion should be exercised to join the corporate trustee to the proceedings. That necessitates a consideration of whether the points of claim document is sufficient to satisfy the requisite condition that there be a statement of the claim such that the third party is able to understand what case it is to meet, and because of the requirements of procedural fairness, whether the corporate trustee can participate without disadvantage having regard to what has occurred? Has the proposed third party been accorded procedural fairness to a degree that would justify the Court making it a party with all of the attendant obligations, entitlements and liabilities?

4. Despite what was said in Aon (supra), a significant consideration is whether justice can be achieved between the parties to the marriage in making orders for the division of their property. The legislative requirement is that this Court must not make an order unless it is satisfied that it is just and equitable to do so (see s 79(2)).

Is the wife’s points of claim document sufficient to justify the joinder in view of the procedural difficulties that may follow? Has the proposed third party been accorded procedural fairness?

1. Senior counsel for the corporate trustee cited the decision of Pencious v Pencious [2010] FamCA 605 in which I applied B Pty Ltd & Ors v K.  In Pencious I observed that (at paragraphs 2 to 4):

   The recipient of the application for joinder as well as all other parties to the litigation must be able to identify what material facts give rise to a cause of action against the party sought to be joined. Perhaps the practical test is whether the application would enable the party so joined or to be joined, to respond, in the sense of filing a defence to the claim. This Court is not a court of pleadings so formal statements of claim and defence are not relevant…

   …

   After pointing to the jurisdictional basis upon which orders are sought (if they are), the application for joinder (or the person seeking to defend having joined a person) must be able to show that the rights of those persons may be affected by an issue in the case but also that participation is necessary to enable the court to determine all issues in the case.

2. In B Pty Ltd v K the Full Court, said:

   [i]t is not proper to allow a joinder of third parties merely… on the basis that at trial facts to support the application may be asserted and proved. Sufficient facts must be asserted to demonstrate that, if proved, the law arguably provides the relief sought.

3. It is important to look at what the Full Court said specifically in relation to s 90AE, that:

   Any order made pursuant to s 90AE(2)(b) must be for the purpose of effecting a division of property between the parties. The order that the wife proposed was for the purpose of increasing the property of the parties, by an unknown amount and on unknown principles.

4. As for the sufficiency of the wife’s points of claim document, a number of decisions of this Court discuss the principles of natural justice in relation to providing a third party with notice of a claim made against it, as well as a reasonable opportunity to be heard. In Gould v Gould; Swire Investments Ltd, (1993) FLC 92-434 at [80,449] to [80,451], cited in B Pty Ltd v K, the Full Court discussed the procedure for the joining a party to proceedings and noted that the history of the Act and Rules in relation to joining third parties had not “followed a clear course”. Fogarty J, with Nicholson CJ and Finn J agreeing, observed (at [80,449]) that:

   Ordinarily, where in litigation orders are sought against a person, that person is made a party in the proceedings as the respondent or defendant (as the case may be). The process also identifies the nature and basis of the claim. It is then served upon that person in accordance with the practice of the Court in question. This is an aspect of the overall principles of natural justice, namely, that a person against whom a claim is made must be given notice of that claim and a reasonable opportunity to be heard: see the discussion by the High Court in Taylor v Taylor (1979) FLC 90-674, esp. per Gibbs J at p. 78,589.

   …

   I conclude, consistently with Buckeridge and Barro, that the correct procedure, where an applicant in proceedings under the Family Law Act seeks relief against a person who is a stranger to the marriage or relationship, is to name that person as an additional respondent in the proceeding and set out the nature of the claim and the basis of it in the ordinary way in the application.

5. The Full Court considered that the appropriate procedure to follow was to name the third party as a respondent in the amended application and set out the nature and basis of the claim and the relief sought against it in the amended application.

6. Particularisation of claims arose in Wayne & Dillion & Dillion [2008] FamCAFC 204 where the Full Court, constituted by Warnick J, cited B Pty Ltd v K and Gould v Gould. The question arose on an appeal from the Federal Magistrates Court. His Honour noted that the Federal Magistrates Court Rules 2001 (Cth) provided in rule 11.01 that “a person whose participation is necessary for the Court to completely and finally determine all matters in dispute in a proceeding must be included as a party in the proceeding”. The construction of that rule is similar to that of rule 6.02. His Honour observed (at paragraphs 17 to 19) that:

   As seen, while neither that rule nor the relevant Family Law Rule refers to an applicant for leave to join having to establish a cause of action and supporting “case” which, taken at its highest, is arguable, that test was adopted by the parties before Morgan J and by her Honour. That approach was not attacked in the appeal in B Pty Ltd & K (supra). It is a test consistent with the references, in the passages quoted above from B Pty Ltd & K (supra), to the need for an applicant for joinder to set out the nature of the claim and the basis of it. As also seen, in Gould v Gould; Swire Investments Ltd (1993) FLC 92-434, Fogarty J particularly referred to the need for fairness to the third party. Any person joined to a proceeding ought, at that point, be able to take advice on whether the facts pleaded (if established) would lead to a successful claim. Joinder to litigation is a serious step with often significant financial consequences.

   The word “necessary” in rule 11.01(1) must mean something more than “useful” or “expeditious”. In my view, if there are available alternative means to joinder to the substantive proceedings, of obtaining from a third person or someone already a party what is needed to allow an applicant for joinder to establish an identified “case”, joinder is unlikely to be “necessary”.

   However, if a cause of action, recognisable at law, against a “third person” is particularised, then it is at least highly likely that joinder will be “necessary for the court to completely and finally determine all matters in dispute”…

7. In this case, the wife asserts that she wants the joinder order for enforcement purposes. That alone would not satisfy the “necessary” test. Despite the order I made in February 2011, no specific details have been provided by the wife such that a defence to the statement of her claim could be filed. The wife’s view was that the corporate trustee knew what the case was about because the husband and his father participated as witnesses in the trial. Her view was also that the corporate trustee was needed as a party so that any order against the husband could be enforced. Unfortunately, I do not accept that it is that simple.

8. The wife asserts that the position will be clear if and when the Court makes a declaration as to the entitlement of the husband in the discretionary trust. However, that can only occur if the Court accepts evidence as to not only entitlement but also value. No application at this stage has been made for that evidence to be adduced.

9. It is perhaps unfortunate in this case that the issue of entitlement and value have only arisen as a dispute at this late stage rather than during the interlocutory processes that occurred prior to trial. It is unfortunate because it gives rise to questions about what evidence already given is admissible against the proposed third party. I consider that natural justice requires, leaving aside issues of fairness under the Evidence Act 1995 (Cth) that all parties have the same right to participate. Whilst there is no apparent clear and binding authority on the point, I would, without further argument, adopt with respect, the views of the Supreme Court of Victoria in Dillion v Nash per Scholl J.

10. Focussing on the power to make the proposed order either by way of Part VIIIAA of the Act or by relying upon the accrued jurisdiction, as the wife did, does not resolve the “factual sufficiency of the basis for the wife’s claim” referred to in B Pty Ltd v K. If, as the Full Court said, it is not proper to make the joinder merely on the basis that facts and assertions may be proved at trial then in this case the discretion should favour not joining the corporate trustee. However, that does not end the matter.

Is the lateness of the approach by the wife so prejudicial to the proposed third party that joinder should not be permitted and the wife be required to proceed on the basis of the case as first commenced?

1. In Aon (supra) on the issue of the late amendment of pleadings, the plurality 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.

   A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate.

2. In Cales v Cales (2010) FLC 93-459 at [85,265] the Full Court of this Court in relation to a proposed amendment to a ground of appeal in a parenting matter observed that:

   The question of late amendment of pleadings, and the interface of such an application with rules relating to case management are the subject of the decision of the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175. We observe that the main purpose of the Family Law Rules 2004 (“the rules”) is framed in similar language to the ACT Court Procedure Rules 2006, the subject of consideration by the High Court.

   Although the case before the High Court dealt with an application to amend a pleading at first instance and not a Notice of Appeal, we are satisfied the principles referred to by the High Court have equal application to a Notice of Appeal.

3. Unfortunately, I do not see that the issue is that clear cut. This Court is not a court of pleadings. The opportunity to present evidence is not always under the absolute control of the litigants in first instance proceedings. The justice and equity requirement in s 79(2) clouds the problem. There was a complaint here about incomplete discovery notwithstanding the longevity of the proceedings and the interlocutory pathway it had followed. This case does not quite fit the Aon description.

4. It is fundamental to the administration of justice that substantial issues between the parties are settled in first instance proceedings. It is the duty of this Court (see s 81 of the Act) to avoid further proceedings between the parties and to determine with finality their financial relationship. In those circumstances I must dismiss the wife’s interim application, grant her leave to file and serve a fresh application to join the corporate trustee along with a statement of the claim in support of the application that complies with the requirements in B Pty Ltd v K.

5. The wife’s fresh application and statement of the claim should be filed and served expeditiously on the husband and the corporate trustee within fourteen days of the delivery of this judgment. Any other applications, including applications brought pursuant to Chapter 15.5 of the Rules, sought by the wife must also be filed and served expeditiously on the husband and corporate trustee within fourteen days of the delivery of this judgment.

6. On the filing of the wife’s fresh application and any other applications it is appropriate that a further procedural hearing be held to determine the applications brought by the wife.

1. Dependent on the outcome of that hearing, a directions hearing may then be held prior to the resumption of the trial to make arrangements for the appropriate evidence to be filed and a determination made as to the participation of the corporate trustee in the event that it is joined as a third party to the proceedings.

I certify that the preceding Seventy Two (72) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 1 June 2011.

Associate: 

Date:  1 June 2011