Stopford Malloy & Malloy
[2021] FamCA 100
•8 March 2021
FAMILY COURT OF AUSTRALIA
Stopford Malloy & Malloy [2021] FamCA 100
File number(s): ADC 2595 of 2015 Judgment of: HARPER J Date of judgment: 8 March 2021 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE –Joinder of parties –– Statutory interpretation – Rule 6.03(2) and (3)(b) of the Family Law Rules 2004 (Cth) – Where Wife joins third parties by filing Amended Initiating Application pursuant to Rule 6.03(3)(2) – Where no compliance with Rule 6.03(3) – Whether joinder of third parties pursuant to Rule 6.03(2) was a “nullity” – Whether affidavit required by Rule 6.03(3)(a) is “mandatory” – Rules to be construed consistently with the main purpose in Rule 1.04 – Consideration of Rules 6.02, 6.03, 6.04, 11.10.
FAMILY LAW – PRACTICE AND PROCEDURE – Statutory interpretation – Consequences of non-compliance with Rule 6.03 – Whether the third parties should be removed from the proceedings pursuant to Rule 6.04 – Summary dismissal – Whether proceedings against third parties should be dismissed pursuant to Rule 11.02(2) – Consideration of Rules 10.12 and 11.02(2) – Whether relevant to consider prospects of success – Discretion to dispense with the requirements of rule 6.03 nunc pro tunc – Application dismissed – Costs reserved.
Legislation: Family Law Act (1975) Cth s 106B
Family Law Rules 2004 (Cth) rr 1.04, 1.06,1.07, 6.02, 6.03,6.04, 10.12, 11.02, 11.10.
Federal Court of Australia Act 1976 (Cth) s 31A)
Cases cited: B Pty Ltd & ors & K & Anor [2008] FamCAFC 113
Cao & Cao [2018] FamCAFC 252
Chifley & Ha [2017] FamCA 683
Deveigne & Anor v Askar (2007) 239 ALR 370
El Saeid & Masih and Ors [2015] FamCA 516
Greig & Duff as Liquidators of Australian Building Industries P/L (in liq) v Australian Building Industries P/L (in liq) & Anor [2003] QCA 298
Hancock Family Memorial Foundation Ltd v Fieldhouse [No 3] [2010] WASC 223
Hunter Resources Ltd v Melville (1988) 164 CLR 234
Jamieson v R (1993) 177 CLR 574
John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1
Kelly & Lomax and Anor [2013] FamCA 496
MacFoy v United Africa Co Ltd [1962] AC 152
Malloy & Stopford Malloy [2019] FamCA 986
Malloy & Stopford Malloy [2020] FamCA 506
Malloy & Stopford Malloy and Ors [2020] FamCAFC 270
Malloy and Ors & Stopford Malloy [2017] FamCAFC 204
Patel and Noora [2019] FCWA 260
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
R-v- T [2020] WASCA 109
Re Pritchard [1963] Ch 502
Riemann & Riemann and Ors (No 3) [2017] FamCA 911
Sigley & De Santis (No 2) [2019] FamCA 596
Spencer v The Commonwealth (2010) 241 CLR 118
State of NSW v Kable (2013) 252 CLR 118
Stopford Malloy & Malloy (No 3) [2016] FamCA 931
Storrer & Storrer and Ors [2012] FamCA 448
Wayne & Dillon and Anor (2008) 40 Fam LR 543
Zhou & Wei [2019] FamCA 194
Number of paragraphs: 81 Date of hearing: 25 January 2021 Place: Sydney Counsel for the First, Second and Third Applicants: Mr Richardson SC Solicitor for the First, Second and Third Applicants: Barnes Brinsley Shaw Lawyers Counsel for the Respondent: Mr Wells QC & Mr McGinn Solicitor for the Respondent: Piper Alderman ORDERS
ADC2595/2015 BETWEEN: DD PTY LTD (ACN … )
First Applicant
MR Q MALLOY
Second Applicant
THE MALLOY GROUP
Third Applicant
AND: MS STOPFORD MALLOY
Respondent
ORDER MADE BY:
HARPER J
DATE OF ORDER:
8 MARCH 2021
THE COURT ORDERS THAT:
1.The requirements of Rule 6.03(3) of the Family Law Rules 2004 (Cth) be dispensed with nunc pro tunc in relation to the Amended Initiating Application filed on 10 April 2019.
2.The Application in a Case filed on 28 August 2020 by the Second to Fourth Respondents be dismissed.
3.All questions of costs of and incidental to the Application in a Case filed on 28 August 2020 be reserved.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Stopford Malloy & Malloy has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
These proceedings were commenced by Ms Stopford Malloy (“the wife”) by her Initiating Application filed 15 July 2015. At that time, Mr Malloy (“the husband”) was the only other party to the proceedings. The wife sought parenting and financial orders.
This judgment is the latest in no less than twenty earlier judgments in this long running and acrimonious litigation. Her Honour Chief Justice Bryant, the Full Court, his Honour Justice Tree, and I have delivered judgments in this matter since 2016 which explain some of the background. Those judgments will be referred to as necessary in these reasons and render a detailed history in this judgment unnecessary. I will refer to other aspects of the background where required in the course of these reasons.
On 10 April 2019, the wife filed an Amended Initiating Application which named DD Pty Ltd as the Second Respondent, Mr Q Malloy as Third Respondent and Malloy Group as Fourth Respondent in the substantive proceedings. The “Malloy Group” is a shorthand reference to some 47 corporate entities which were listed in an annexure to the Amended Initiating Application. One of the listed entities is DD Pty Ltd. Mr Q Malloy is the father of the husband, as well as a director and majority shareholder of each of the companies comprising the Malloy Group. The Second to Fourth Respondents are strangers to the marriage between the wife and the husband. I will refer to them as “the third parties” for the purposes of this judgment.
The third parties filed a Response to the wife’s Amended Initiating Application on 11 November 2019. This Response sought orders, on a final and interim basis, dismissing the wife’s claims against them and removing them as parties to the proceedings.
On 28 August 2020, Mr Q Malloy and Malloy Group filed an Application in a Case seeking relief in the same terms as their Response. DD Pty Ltd was included in this Application as part of the Malloy Group. The wife seeks orders that the Interim Orders sought in the third parties’ Response, and their Application in a Case filed 28 August 2020, be dismissed. The parties seek an order for costs against each other.
This judgment concerns the Application by the third parties to be removed from the proceedings as respondents and to have the wife’s claims against them dismissed. I note here that the husband did not himself participate in the hearing of this application.
FURTHER HISTORY
It is undisputed that the husband has been reliant on his father and some at least of the third parties for financial support before and during the litigation.
In Malloy and Ors & Stopford Malloy [2017] FamCAFC 204 at [7] - [19], the Full Court set out the following brief description of the background which indicates some of relevant background and the connections between the wife, the husband and the third parties:
7. The wife was born in 1981 and was aged 35 years at the time of the hearing before the primary judge. The husband was born in 1969 and was aged 46 years at that time.
8. The parties commenced their relationship in June 2010, and began cohabitation in March 2011, residing in a property purchased by the husband between 2000 and 2008 at Suburb B (“the Suburb B property”). The purchase of the property had been funded by substantial borrowings from the National Australia Bank and EE Bank.
9. In 2013 the husband and the wife married in the USA.
10. In November 2014 the husband purchased a property at Suburb E for $2,800,000 (“the Suburb E property”). That purchase was funded by funds advanced by the National Australia Bank and FF Pty Ltd, one of the companies in the Malloy Group of Companies. The amount outstanding at the time of the hearing before the primary judge secured by mortgage over the Suburb E property, was approximately $2,950,000. The National Australia Bank lent the money to another Malloy Group company, FF Pty Ltd as Trustee of Mr Q Malloy Family Trust as the borrower. The husband guaranteed the payments by FF Pty Ltd to the National Australia Bank, and FF Pty Ltd has made all repayments under the mortgage loans.
11. In March 2015 the parties separated, with the husband moving to the Suburb B property, and the wife remaining in the Suburb E property.
12. The Malloy Group of Companies was established by the husband’s father in the 1980s. The wife describes the structure of these companies as “complicated”. She says that the Malloy Group of Companies are run as a family business involving hundreds of millions of dollars in multiple states.
13. The wife deposed to the husband being a director and a shareholder of a number of companies in the Malloy Group of Companies.
14. The husband says that he left the Malloy Group of Companies in 1995, having been a director from 1987 – 1995. He then formed the AA Group, but sold a portion of that group which consisted primarily of two large properties in Adelaide in 2002. He retained various companies which owned substantial property, and he purchased land for major business operation.
15. Between 2000 and 2008 the husband says that he purchased a number of residential properties funded by substantial borrowings from commercial lenders. He says that from 2010 onwards his financial position deteriorated, caused mainly by inadequate cash flow. In order to reduce debt the husband says that, with the exception of the Suburb B property, all other residential properties were sold, together with the Property CC, and the proceeds of these sales were put to debt reduction.
16. In 2012 the husband’s father agreed to take over responsibility for the liabilities of the AA Group on the condition that he took control of parts of the business. The husband was required to guarantee payment of the debt for the funds advanced by the Malloy Group of Companies, and to provide mortgage security over the Suburb B property.
17. At EE Bank’s insistence the husband’s father is a co-borrower with the husband of the first mortgage loan from EE Bank. DD Pty Ltd as Trustee of the Mr Q Malloy Family Trust has met all payments in relation to the EE Bank loan and those payments are recorded as a loan to the husband.
18. The husband’s father has also funded the husband’s living expenses, and as a result of the mortgage repayments and the payment of those expenses, the husband was indebted to DD Pty Ltd as Trustee of the Mr Q Malloy Family Trust in the sum of $3,075,819 as at 30 June 2015. Thus in the end result, the husband retained ownership of the Suburb B property but with a substantial mortgage liability to EE Bank and to the Malloy Group of Companies secured by mortgage.
19. The husband says that he has “no occupation” and that his personal income tax return shows that he has no income. In short, the husband asserts that he has a shortfall of assets over liabilities, and that since approximately 2010 he has “relied entirely on the largesse of [his] father for [his] financial support. [He] therefore owe[s] the Malloy Group [of Companies] a substantial sum by way of loan for [his] living expenses”.
The third parties have been involved in this litigation in various ways since it was commenced by the wife on 14 July 2015, as the following, non-exhaustive, list of interlocutory Applications shows:
(1)Wife’s Initiating Application filed 14 July 2015 sought “Discovery” from “Malloy Group”, which included DD Pty Ltd;
(2)Wife’s Application in a Case filed 28 September 2015 sought production of loan agreements between the husband and Malloy Group, and financial statements for DD Pty Ltd from 30 June 2010 to 28 September 2015;
(3)Wife’s Application in a Case filed 13 May 2016 named Mr Q Malloy and the Malloy Group as the second and third respondents, respectively;
(4)The Malloy Group's Application in a Case filed 11 October 2016 seeking a stay pending appeal of orders made by Bryant CJ on 5 September 2016 (see below);
(5)Wife’s Application in a Case filed 20 November 2016 sought injunctive relief against Mr Q Malloy and the Malloy Group, each member of the Malloy Group, and AR Pty Ltd;
(6)Mr Q Malloy and The Malloy Group's Application in a Case filed 6 March 2017 seeking a stay of orders;
(7)Mr Q Malloy and The Malloy Group's Application in a Case filed 11 July 2017 seeking orders that subpoenas to FF Pty Ltd, AR Pty Ltd, LE Pty Ltd, and BB Pty Ltd, to be set aside.
It is also relevant to record that:
(1)On 19 October 2015, orders were made by consent for the husband to pay spousal maintenance. These were varied slightly on 22 April 2016. Following such order, there was a hearing to enforce the spousal maintenance orders, and followed by applications for leave to appeal to the Full Court: Malloy & Stopford Malloy [2020] FamCA 506 at [8], [9], [27] - [39].
(2)In Stopford Malloy & Malloy (No 3) [2016] FamCA 931 at [16,] Austin J accepted that the wife “is not bound by assertions or contentions made by others on behalf of the Husband or by third parties (such as the Husband's father) about the questions of control, ownership or purposes of the nebulous network of corporations known as the “[Malloy] Group”.
(3)On 5 September 2016, Bryant CJ made orders dismissing an Application by the husband to vary spousal maintenance orders made on 19 October 2015 and enforced those orders by the appointment of receivers to the property of and income of the husband. The husband sought leave to appeal which was granted. The third parties also sought leave to cross-appeal on the basis the spousal maintenance orders against the husband were in substance orders against them because of the husband’s financial reliance upon them, meaning their interests were directly affected; leave was refused by the Full Court for lack of standing to appeal: Malloy and Ors & Stopford Malloy [2017] FamCAFC 204 at [36] - [37].
(4)The reliance by the husband upon his father for financial assistance has been consistently treated as an undisputed aspect of his financial situation. In Malloy and Ors & Stopford Malloy [2017] FamCAFC 204 at [48], the Full Court quoted Bryant CJ at [164] where she referred to the husband’s “father switching on and off financial largesse as the fortunes of the parties’ relationship ebbed and flowed”.
(5)His Honour Justice Tree delivered a judgment on 13 December 2019: Malloy & Stopford Malloy [2019] FamCA 986, finding that at the heart of the wife’s case, there are unpaid present entitlements said to be due and payable to the husband as a beneficiary under a number of trusts, of which some of the Malloy Group companies are trustees. He noted the wife’s contention was that, to the extent that those trustees no longer have funds to satisfy the payment of those unpaid present entitlements, “their dealing with those funds is a traceable breach of trust, and to that end, seeks to identify the entities which presently hold them, so that they may be recovered, presumably now that the [Malloy] Group have been joined as parties, in these proceedings themselves.” (emphasis added). Tree J, among a range of other orders, made orders which directly affected the interest of at least some of the third parties, specifically orders that the Malloy Trust and the FF Trust produce an unredacted version of their financial accounts which had previously been provided in a redacted form. Mr Q Malloy and the Malloy Group were parties to the Applications determined by this judgment, they appeared and made submissions
(6)The husband sought leave to appeal from the orders made by Tree J. The third parties also actively participated in this appeal process by filing on 10 January 2020 a cross-appeal, seeking leave to appeal, and if leave was granted to also appeal against the orders made on 13 December 2019. These applications for leave to appeal were refused by the Full Court: Malloy & Stopford Malloy and Ors [2020] FamCAFC 270.
It might be fairly said that the third parties have been teetering on the edge of joinder for some time prior to the filing of the Amended Initiating Application. After it was filed, on 2 September 2019, the solicitors for the third parties wrote to the wife’s solicitors noting that no affidavit had been filed in support of the Amended Initiating Application. Rule 6.03 is not mentioned, although the letter does refer to the absence of “the material facts which form the basis of the claim”. The letter goes to notify the wife’s lawyers that the third parties would seek an order on 3 September 2019 for her to file a Statement of Claim. At a directions hearing on 3 September 2019, the wife agreed to file and serve a Statement of Claim. At that stage, the time specified for this step to take place was seven weeks.
On 15 July 2020, the Wife filed and served the Points of Claim which outline and particularise the basis of her claim against the third parties. The third parties point out that it took the wife nearly 66 weeks from filing the Amended Initiating Application to file and serve her Points of Claim. The document on its face makes plain that it is based on “disclosure made to date and information the subject of contested subpoenas in respect of which inspection has not been able yet to be completed”.
The third parties have contended in correspondence that they should be disjoined.
MATERIAL RELIED UPON
The third parties relied upon the following documents:
(1)Case Outline filed 11 January 2021;
(2)Affidavit of Mr GG sworn 14 June 2016;
(3)Affidavit of Mr MM affirmed 6 April 2017;
(4)Affidavit of Mr GG sworn 10 July 2017;
(5)Affidavit of Mr MM affirmed 26 March 2018;
(6)Affidavit of Mr PP sworn 11 November 2019; and
(7)Affidavit of Mr PP sworn on 28 August 2020.
I note here that the wife objected to the reliance upon the affidavits listed at (2) to (4). The wife argued that these affidavits had been filed for a different Applications and reliance upon them for the present Application violated rule 15.06 and denied her procedural fairness. Another objection was based upon the contention that since the third parties were seeking summary dismissal against the wife, their affidavit evidence was required to be in a form which would be admissible at final hearing. However, the third parties made clear they relied on the nominated affidavits to provide evidence of the extent of their disclosure since 2016, but not as to the truth of any fact asserted in those affidavits. I allowed the affidavits to be read on that limited basis; I was satisfied the wife would not suffer any practical injustice by doing so.
The wife relied upon the following documents:
(1)Case Outline and Written Submissions filed 15 January 2021;
(2)Affidavit of Ms AN sealed 28 September 2020;
(3)Documents contained in the Book of Documents filed 15 January 2021, which includes the following:
(a)Wife’s Amended Initiating Application filed 10 April 2019;
(b)Second and Third Respondents’ Response to Amended Initiating Application filed 11 November 2019;
(c)Affidavit of Mr PP, solicitor for the Second and Third Respondents filed 11 November 2019;
(d)Wife’s Reply to Response to Amended Initiating Application filed 2 December 2019;
(e)Affidavit of Ms AN, solicitor for the Applicant Wife filed 2 December 2019;
(f)Applicant Wife’s Points of Claim filed 14 July 2020;
(g)Second and Third Respondents’ Application in a Case filed 28 August 2020;
(h)Affidavit of Mr PP, solicitor for the Second and Third Respondents filed 28 August 2020;
(i)Applicant Wife’s Response to an Application in a Case filed 28 September 2020;
(j)Case Outline of the Second and Third Respondents filed 11 January 2021;
(k)Submissions of the Second and Third Respondents filed 11 January 2021;
(l)Submissions of Second and Third Respondents regarding costs regarding stay Application dated 13 January 2017;
(m)Transcript of hearing dated 6 February 2017, page 42, as to non-acceptance of Mr GG's Affidavit of 14 June 2016;
(n)Tab 144 of Mr GG's Affidavit of 11 July 2017;
(o)Outline of Submissions of “Named Persons” (Part of Third Respondent) dated 14 July 2017;
(p)Wife’s Written Submissions – page 1 of 3, only, dated 18 June 2018;
(q)Transcript of hearing of 6 December 2018;
(r)Notice of Appeal of Husband (SOA 87 of 2016) filed 3 October 2016;
(s)Notice of Cross Appeal of Second and Third Respondents (SOA 87 of 2016) filed 3 October 2016;
(t)Submissions of Second and Third Respondents filed in SOA 87 of 2016 filed 3 November 2017;
(u)Notice of Appeal filed by the Husband (SOA 4 of 2020) dated 8 January 2020;
(v)Notice of Cross Appeal filed by the Second and Third Respondents (SOA 4 of 2020) filed 10 January 2020;
(w)Husband’s Response to Points of Claim, served but not filed, including covering email dated 24 August 2020; and
(x)Email from Wife’s solicitor to the solicitor for the Second and Third Respondents dated 10 December 2020.
THE LAW
Joinder of parties is dealt with in Chapter 6 of the Family Law Rules 2004 (Cth) (“the Rules”). Rules 6.02, 6.03 and 6.04 are relevant. Rule 6.02(1) provides:
(1) 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.
Rule 6.03 is in the following terms:
…
(2) A party may add another party after a case has started by amending the application or response to add the name of the party.
(3) A party who relies on subrule (2) must:
(a) file an affidavit setting out the facts relied on to support the addition of the new party, including a statement of the new party's relationship (if any) to the other parties; and
(b) serve on the new party:
(i) a copy of the application, amended application, response or amended response; and
(ii) the affidavit mentioned in paragraph (a); and
(iii) any other relevant document filed in the case.
Rule 6.04 provides simply that: “[a] party may apply to be removed as a party to a case.”
Mention should be made of rule 11.10 which also deals, in part, with amendment to add a party:
Amendment by a party or court order
(1) A party who has filed an application or response may amend the application or response:
(a) for a case started by an Initiating Application (Family Law):
(i) at any time before the procedural hearing at which the case is allocated the first day before the Judge; or
(ii) if the court gives permission--at a later time;
(b) for an Application in a Case:
(i) at or before the first court date; or
(ii) at any later time, with the consent of the other parties or by order; and
(c) for all other applications--at any time, with the consent of the other parties or by order.
Note: An amendment of an application may be necessary to ensure that the court determines the real issues between the parties or to avoid multiple cases.
(2) A party who:
(a) has filed an Initiating Application (Family Law) or Response to an Initiating Application (Family Law); and
(b) seeks to add or substitute another cause of action or another person as a party to the case;
must amend the Form in accordance with this Division.
(3) If an amendment mentioned in subrule (2) is made after the first court date, the Registry Manager must set a date for a further procedural hearing.
(4) If a date is set for a further procedural hearing, the party amending the Initiating Application (Family Law) or Response to an Initiating Application (Family Law) under subrule (2) must give each other party written notice of the hearing.
The terms of subparagraph 11.10(2)(b) require amendment of the appropriate form of Application or Response by a party who seeks to add a party.
The third parties’ first position relies upon the fact that the mother failed to comply with rule 6.03(3)(a) and (b). There was no dispute that none of the affidavit or documents stipulated in those sub-paragraphs have ever been filed or served by the mother. The parties agreed that the terms of rule 6.03(3)(b) are “mandatory”. The third parties contend that failure to comply with rule 6.03(3)(b) means the step taken of adding them as parties by amendment pursuant to Rule 6.03(2) was a “nullity”. As a consequence, so the argument goes, the joinder of the third parties never happened. In essence, the argument of the third parties is, or is akin to, an allegation of a step taken by the wife without power. As a matter of construction, I do not accept this argument.
Nullity is a concept long known to the law. Nullities are void without any order of a Court, they are not merely voidable: MacFoy v United Africa Co Ltd [1962] AC 152 at 160. The assertion of “nullity” frequently arises in connection with the status of proceedings with an alleged flaw in the manner of their constitution or Court orders made without jurisdiction or without power. For example, in Re Pritchard [1963] Ch 502 at 523-524, it was held that a proceeding that appeared to be duly issued but that failed to comply with a statutory requirement would be a nullity; they were identified as a “class of nullity”, being proceedings which have never started at all owing to some fundamental defect in issuing the proceedings, and proceedings which appear to be duly issued but fail to comply with a statutory requirement. In Deveigne & Anor v Askar [2007] NSWCA 45; (2007) 239 ALR 370; (2007) 69 NSWLR 327, in a detailed consideration of authority at [85] to [126], McColl JA demonstrated that the concept of a “nullity” has been applied primarily to proceedings, or a step in them, when they suffer from a fundamental flaw at inception, such as proceedings commenced by a non-existent person without a cause of action, or against a person who does not exist or is dead, or proceedings which have never been served.
But, the High Court has said that care should be taken in using words like "void", "voidable", "irregularity" and "nullity". Although a distinction is sometimes drawn between proceedings that are "irregular" and those that are "null and void" or a "nullity" in connection with applying rules of court which provide for the consequences of non-compliance with the rules, the line between is not clear, the choice is not “between two realms whose borders are sharply defined and completely closed”. Where want of power is in issue, it is necessary to take account not only of who may complain about the want of power, but also of what remedy may be given in response to the complaint: see State of NSW v Kable (2013) 252 CLR 118; 87 ALJR 737; 298 ALR 144; [2013] HCA 26 (“Kable”) at [21] - [23] (French CJ, Hayne, Crennan, Kiefel, Bell and Keane JJ).
In Kable at [52], when referring to a purported but invalid law, or a thing done in the purported but invalid exercise of a power conferred by law, Gageler J said that both remained “at all times a thing in fact”. He continued:
The thing is, as is sometimes said, a ‘nullity’ in the sense that it lacks the legal force it purports to have. But the thing is not a nullity in the sense that it has no existence at all or that it is incapable of having legal consequences. The factual existence of the thing might be the foundation of rights or duties that arise by force of another, valid, law [citation omitted].
The decision in Kable made clear the existence of a remedy against an impugned exercise of power is an important consideration on the question of nullity. For example, if a Court makes an order affecting a person who should have been joined as a necessary party, while the order will not be a nullity, that person is entitled to have the order set aside, and is not limited merely to seeking the favourable exercise of a discretion, whether or not the person in question becomes a party: John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; (2010) 266 ALR 462; 84 ALJR 446; [2010] HCA 19 at [137]. The Queensland Supreme Court has held its proceedings (if defective) cannot be regarded as nullities if there is a remedial power capable of curing the defect: Greig & Duff as Liquidators of Australian Building Industries P/L (in liq) v Australian Building Industries P/L (in liq) & Anor [2003] QCA 298 said at [153].
It should also be born in mind that, although the parties accepted rule 6.03 was couched in mandatory terms, this characterisation is not particularly helpful in determining contentions about nullity. In Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 (“Project Blue Sky Inc”), at 390, [93], the High Court disapproved the elusive distinction between directory and mandatory statutory requirements and a process of reasoning which asked whether there has been “substantial compliance” with directory requirements:
…a court,… may easily focus on the wrong factors if it asks itself whether compliance with the provision is mandatory or directory and, if directory, whether there has been substantial compliance with the provision. A better test for determining the issue of validity is to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid.
[footnotes omitted]
As Project Blue Sky Inc makes clear the use of “mandatory” as a descriptor states a conclusion. Rather than use “mandatory”, the better test is to ask whether it was a purpose of the Rules, and in particular Chapter 6 of the Rules, that an act done pursuant to one subrule (6.03(2)) should be invalid for failure to comply with another subrule (6.03(3)).
At this point it is convenient to refer to the main purpose of the Rules, and the rules which oblige parties and the Court to promote and achieve the main purpose. In rule 1.04, the main purpose stated as:
The main purpose of these Rules is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case.
Rule 1.06 imposes an obligation on the Court to apply the rules to promote the main purpose through active case management orders and directions, including ensuring that parties and their lawyers comply with these Rules, any practice directions and procedural orders, and considering whether the likely benefits of taking a step justify the cost of that step: rule 1.06(f)-(g).
Rule 1.07 requires the Court to apply the Rules to achieve the main purpose “in a way that” relevantly:
(a) deals with each case fairly, justly and in a timely manner;
…
(c) is proportionate to the issues in a case and their complexity, and the likely costs of the case;
(d) promotes the saving of costs;
(e) gives an appropriate share of the court's resources to a case, taking into account the needs of other cases.
These rules make clear that in construing the meaning of rules in the process of applying them, the Court must take account of the main purpose and settle on a construction which, as far as possible, is consistent with, and achieves, the main purpose.
In accordance with the principles of statutory construction, it is necessary to consider the words, context and purpose of rule 6.03. For this reason, rule 6.03 should not be construed in isolation from other relevant rules about joinder, or the Rules generally. Rules 6.02, 6.03, 6.04 and 11.10 should be interpreted consistently and harmoniously. This approach is dictated not only by the established approach to statutory construction, but specifically by the obligations in rules 1.06 and 1.07.
Rule 6.02(1) appears to have two limbs, specifying 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”. One obvious purpose of the rule is to ensure all necessary parties are before the Court, in order for the principle of finality in litigation to be satisfied. It also clearly addresses issues of procedural fairness. Recently in R -v- T [2020] WASCA 109, Vaughan JA said at [203]:
… rule 6.02(1) - at least as to its first limb - is reflective of the principles that inform the general law as to joinder. I am inclined to the view that the second limb (ie that of 'necessity') adds little to the first: where the court is invited to make an order directly affecting the rights or liabilities of a non-party, the non-party is a necessary party. In turn those principles are based on the principles which underpin the law of procedural fairness. Non-compliance with rule 6.02(1) does not of itself mean that there has been a failure to accord procedural fairness. All the more so it does not mean that there has been a failure to accord procedural fairness such as would entitle a third party to set aside an order made in its absence. The Family Law Rules do not dictate any particular consequences for failure to comply with rule 6.02. And, as is mentioned by the note to the rule, compliance may be dispensed with.
[footnotes omitted]
Rule 6.02 does not specify any particular manner for demonstrating that a party’s participation in proceedings is “necessary for the court to determine all issues in dispute”. This is routinely done by filing an Application in a Case supported by affidavit evidence; but, other methods are recognised. In Wayne & Dillon and Anor (2008) 40 Fam LR 543; [2008] FamCAFC 204 (“Wayne and Dillon”), the Full Court observed at [19]: “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”. Particularisation of such a claim or cause of action is also routinely provided by means of a pleading such as a statement of claim or points of claim.
It can be seen that by their terms subrules 6.03(2) and (3) together achieve outcomes which may also work to satisfy the basis for joinder specified in rule 6.02, that is, necessity. But, each of these subrules is different in character to the other. Rule 6.03(2) grants a statutory permission or power to add a party by filing an amending document. In El Saeid & Masih and Ors [2015] FamCA 516 at [15], Aldridge J said of rule 6.03 “[t]his rule provides the mechanism by which a party may add another party. Importantly, subject to any restrictions that may apply to amending the application or the response, new parties may be joined simply by amending the application or response”. No separate Application to do so is required. Rule 11.10(2)(b) requires the appropriate form to be used if this step is taken. As O’Reilly J said in Storrer & Storrer and Ors [2012] FamCA 448 at [22], “[r]ule 6.03, plainly enough, is predicated upon the need to amend for joinder after a case has started. This has effect that, for any adding of parties, [r]ule 11.10 is applicable, subject to [r]ule 1.12, or waiver by the parties”.
At the risk of stating the obvious, breach of subrule 6.03(2) is not possible. A party either takes up the permission or they do not. It is, or it is analogous to, the exercise of a statutory power. There is no issue of compliance.
Subrule 6.03(3) does not give a permission, it imposes obligations to file an affidavit and serve documents on the joined party. This subrule can be breached. By its terms it expressly refers back to reliance on subrule 6.03(2). The argument of the third parties is that the validity of the exercise of the power in rule 6.03(2) is contingent on compliance with rule 6.03(3). I reject this contention for the following reasons.
First, although the subrules are clearly connected, the requirements of rule 6.03(3) are not in terms expressed as preconditions to the validity of the step taken pursuant to rule 6.03(2). They are on their face procedural in nature.
Secondly, in the absence of clear and express wording, the argument of the third parties requires inferring that the relationship between 6.03(2) and 6.03(3) is such that one validates the other. Although the third parties contend the terms of rule 6.03 are mandatory, as a matter of construction and according to the “better test” referred to in Project Blue Sky, it is necessary to look to the purpose of rule 6.03 to determine whether, as a matter of construction, it intended that failure to comply with one subrule should invalidate a step take pursuant to another subrule.
I accept the purpose of the requirements in rule 6.03(3) is to compel a joining party to file and serve the material necessary to inform the Court and the joined party of the basis of the joinder. In other words, it is the purpose of rule 6.03(3) to provide procedural fairness to the joined party and give particulars of the claims against them. But there is nothing in the terms of the rule or its context which shows its purpose is also to deny validity to the step permitted in rule 6.03(2). Rather, taking the step of the joinder pursuant to rule 6.03(2) should be understood as a “thing in fact” of continuing existence with legal consequences, even if rule 6.03(3) is not complied with.
Both parties referred to Zhou & Wei [2019] FamCA 194 at [12] (“Zhou”) and Sigley & De Santis (No 2) [2019] FamCA 596 at [14] (“Sigley”), decisions of Wilson J, in support of their characterisation of rule 6.03 as mandatory. In Zhou, Wilson J merely noted that there was no dispute that compliance with rule 6.03 had taken place and there was no occasion to construe the rule more widely. In Sigley, Wilson J mentioned the use of the word “must” in rule 6.03, but in that case joinder of third parties was agreed, and the only debate was the extent to which rule 6.03 should be complied with. Wilson J clearly did not think compliance was a precondition to the validity of joinder. Rather, he held at [21]: “[n]o particular utility is served in requiring [the joining party] to go on oath in an affidavit merely to recite her contentions or propositions supporting the joinder. However, her solicitors must provide a letter to all parties and file it with the court stating in numbered paragraphs all facts, contentions and relief on which [she] relies to grant the joinder…” The decision in Sigley accords with a construction of rule 6.03(3) which holds that its purpose is to provide a joined party with procedural fairness, not to establish the validity of the step of joinder pursuant to rule 6.03(2).
Thirdly, a purposive approach to rule 6.03 requires a construction which is consistent with the operation of rule 6.02. As already pointed out, rule 6.02 is reflective of the principles that inform the general law as to joinder, where a non-party is a necessary party and should be afforded procedural fairness. Subrule 6.03(2) provides a mechanism for joinder. Compliance with subrule 6.03(3) could be one way to satisfy the Court that a party is “necessary” for the purposes of rule 6.02, by explaining the case against them; but, it is not the only way. For example, if third parties are joined pursuant to rule 6.03(2), and the joining party is ordered to file and serve pleadings particularising why the joined parties are necessary or ordered to provide affidavit material for the same purpose, these steps may be sufficient to satisfy the Court that the joinder was necessary, irrespective of any compliance with subrule 6.03(3).
This construction is supported by observing subrule 6.03(3)(a) and (b) impose a number of different requirements. A joining party could satisfy subrule 6.03(a) but not (b), for example, by filing and serving an affidavit mentioned in subparagraph 6.03(3)(a). This happened in Kelly & Lomax and Anor [2013] FamCA 496 (“Kelly”). What then is the effect of partial compliance? As noted, resort to the notion of “substantial compliance” has been rejected by the High Court. Either there is compliance or there is not: Hunter Resources Ltd v Melville (1988) 164 CLR 234; [1988] HCA 5; at 249, as cited in Project Blue Sky at [92]. In Kelly the joining party relied on subrule 6.03(2) and filed an affidavit satisfying subparagraph 6.03(3)(a), but did not satisfy subparagraph 6.03(3)(b). Tree J was not asked to consider any question of nullity. Notwithstanding that, he seemed to hold the view that rule 6.03 had been sufficiently satisfied, and joinder was effective, but if he was wrong he also exercised the Court’s discretion to dispense with the requirements of subrule 6.03(3) pursuant to rule 1.12: Kelly at [33] - [34]. More generally, as the decision in Kelly shows, the filing and service alone of the affidavit in accordance with subparagraph 6.03(3)(a) may particularise the claim against the third party sufficiently to satisfy the Court that they are a necessary party, as the Full Court said in Wayne and Dillon, but in those circumstances it could not be said subrule 6.03(3) had been complied with. It would be an odd result if the Court was satisfied a party is a necessary party but their joinder using subrule 6.03(2) was invalid through only partial compliance with subrule 6.03(3).
The wife referred to the decision of Austin J in Cao & Cao [2018] FamCAFC 252 at [77] to [79]. Although that was a parenting case, the following comments by Austin J at [77] about procedural fairness are apt:
The concept of procedural fairness is essentially practical, not abstract, and is designed to avoid practical injustice ([Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam [2003] HCA 6; (2003) 214 CLR 1] at 14). The rules of procedural fairness do not have immutably fixed content, though, as a general principle, the parties need to know what case the opposing party seeks to make and how that party seeks to make it (Assistant Commissioner Condon v Pompano Pty Ltd [2013] HCA 7; (2013) 252 CLR 38 (“Pompano”) at 99-100; National Companies and Securities Commission v News Corporation Limited [1984] HCA 29; (1984) 156 CLR 296 at 312). It is also a fundamental principle of justice that a party is given the opportunity of replying to the opposing party’s case (Kioa v West [1985] HCA 81; (1985) 159 CLR 550 at 582).
The wife submitted that the purpose of the affidavit and any other relevant document required by subparagraphs 6.03(3)(a) and (b)(iii) is “not evidentiary”, but to identify the “outer limits” of the joining party’s case and to give the joined parties fair notice of the case against them. She referred to Jamieson v R (1993) 177 CLR 574, 579 (“Jamieson”) (Deane, Dawson JJ). I do not accept this submission entirely. The passage referred to in Jamieson stated the traditional purpose of an unverified statement of claim. It applies more readily to the wife’s Points of Claim than to the affidavit required by subparagraph 6.03(3)(a). An affidavit is evidentiary, containing assertions of fact, and perhaps opinion, made on oath or affirmation. But, the point is that an affidavit satisfying subparagraph 6.03(3)(a) should avoid practical injustice by setting out what case the opposing party seeks to make and how that party seeks to make it, no less but no more. It is quite conceivable that particularisation by Points of Claim in this Court may give a joined party more information and greater procedural fairness than such an affidavit. As Wilson J pointed out in Sigley at [42], an affidavit which recites on oath the facts and contentions of a joining party may not be as useful as a more detailed particularisation in correspondence. In those circumstances, despite non-compliance with subparagraphs 6.03(3)(a), or (b) for that matter, it could not be sensibly argued that the joinder of a party pursuant to subrule 6.03(2) should nonetheless be characterised as a nullity.
Fourthly, as in the case of rule 6.02, the Rules do not dictate any particular consequences for failure to comply with subrule 6.03(3). However, a joined party is not without remedy. An obvious response by a joined party to a failure to comply with subrule 6.03(3) would be to seek to be removed as a party pursuant to rule 6.04. As discussed later in these reasons, non-compliance also enlivens the discretion in rule 11.02 to seek the joining party’s case be dismissed.
Fifthly, a recognition that rules 6.02 and 6.03(3) embody the principles of procedural fairness and require disclosure of particulars of the case against the joined party, leads to the further recognition that a central question for the Court on the question of joinder is whether the joining party establishes an arguable case against the joined party. This has been stated numerous times. Tree J pointed out in Kelly at [36], that in B Pty Ltd & Ors & K & Anor [2008] FamCAFC 113 at [52], the Full Court drew an analogy between the criteria applicable for a joinder application and those applicable to an Application for summary dismissal of the proposed claim against the joined parties:
We do not accept that it is proper to allow joinder of third parties merely upon the formulation of a paragraph in, or to be added to, an application, 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.
Le Miere J in Hancock Family Memorial Foundation Ltd v Fieldhouse [No 3] [2010] WASC 223 observed “[i]t would be futile to order that a person be joined as a defendant if the material before the court disclosed that if the person, having been joined as a defendant, applied for summary judgment the application would succeed.” It would, for the same reasons, be futile to allow a joinder pursuant to rule 6.03(2) to stand if the joining party could not survive summary dismissal. Removal would also be inevitable under rule 6.04.
In Chifley & Ha [2017] FamCA 683, Rees J dealt with an application for costs by a third party who was briefly joined by the filing of an Amended Initiating Application by the wife. No other document of any kind was provided to the third party. It was clear that rule 6.03(3) had not be complied with. The third party was also a witness in the husband’s case. The wife withdrew the joinder prior to hearing. On the costs argument, the wife’s submissions conceded that she had no evidence in support of her application against the third party and that she was reliant on the third party’s evidence, the husband’s evidence and material produced on subpoena. She submitted that, therefore, she could not comply with subrule 6.03(3). Her Honour rejected this contention and at [23] held that was incumbent on the applicant for joinder to file an affidavit setting out the facts on which they relied in accordance with rule 6.03(a). Rees J commented that if the applicant for joinder:
…was not in possession of any facts, the application should not have been filed. Further, it must have been apparent that “any other relevant document filed in the case” included the whole of the affidavit material filed by both the wife and the husband in their respective cases. No attempt was made to provide [the joined party] with any of that material.”
In Chifley & Ha, the wife sought an order pursuant to s 106B of the Family Law Act (1975) Cth (“the Act”), to set aside a transaction between the husband and the third party. Rees J held the wife’s evidence, taken at its highest, could not prove any necessary elements of her claim to such relief. The wife made no attempt to provide any material which could establish a basis for joining the third party, either as a necessary party, or by demonstrating a basis for joinder and that she had provided procedural fairness, for the purposes of either rule 6.02 or 6.03. The wife was ordered to pay the costs of the third party on an indemnity basis.
In Riemann & Riemann and Ors (No 3) [2017] FamCA 911, McClelland J (as he then was) at [35] stated the relationship between rules 6.02 and 6.03 in these terms:
Ultimately, however, there is little difference to the Court’s approach in terms of considering an application under rule 6.02 or, if they had been joined pursuant to rule 6.03, what would inevitably have been an application by the third parties pursuant to rule 6.04. That is because, as I have stated, the essential question is whether the wife has established that she has an arguable case for…the joinder of the parties.
The third parties’ construction of rule 6.03(3) would mean that if the Court is satisfied of the following three matters, that a joinder was necessary for the purposes of rule 6.02, that there is a particularised claim against a joined party which would survive a summary dismissal Application and that joinder has taken place by amendment pursuant to Rule 6.03(2), non-compliance with subrule 6.03(3) would nonetheless render the joinder of no effect, or a nullity. Such a conclusion would sit in considerable tension with a conclusion that the joining party’s case is sufficiently strong to survive summary dismissal. In such circumstances, such a construction of subrule 6.03(3) does not promote or help achieve the main purpose of the Rules. It would risk having the effect of elevating a somewhat arid point about process above the need to achieve a just and timely resolution of proceedings in which a claim is arguable and apply the Rules in a way which is proportionate to the issues and promotes the saving of costs.
Sixthly, Rule 1.12 gives the Court a general discretion to dispense with the requirements of the Rules, on Application or on its own initiative, and before or after the time for compliance arises. In Kelly there was a dispute whether there had been compliance with subrule 6.03(3). Unlike the present matter, in Kelly there was an affidavit filed that complied with at least subparagraph 6.03(3)(a). In the circumstances of that case, Tree J, on his own initiative, exercised the discretion in rule 1.12 to dispense with the requirements of subrule 6.03(3). The broad wording of s 34 of the Act, empowering the Court as it does to make ‘...orders of such kinds...as the Court considers appropriate’, also permits the making of orders nunc pro tunc: Finlayson & Finlayson [2002] FamCA 898. It would therefore be open for the Court, under rule 1.12, to dispense with the requirements of subrule 6.03(3) nunc pro tunc, even if, after a joinder pursuant to subrule 6.03(2), those requirements were not met. If the step taken to join parties pursuant to subrule 6.03(2) was properly characterised as a nullity, the Court would be denied the capacity to exercise the discretion in rule 1.12 in relation to subrule 6.03(3). This counts against the nullity argument of the third parties.
My conclusion that the third parties’ joinder was not a nullity means that there is no live question whether they should be added as a party at this stage. They have been validly added as parties by the filing of the Amended Initiating Application pursuant to subrule 6.03(2). Rather, the question is how the Court should respond to the wife’s failure to comply with rule 6.03(3). Such responses could include exercising the discretion in rule 1.12 to dispense with the requirements of subrule 6.03(3), extend the time for compliance with subrule 6.03(3), order the removal of the third parties pursuant to rule 6.04 or dismiss the proceedings against the third parties pursuant to rule 11.02(2).
The third parties seek removal pursuant to rule 6.04, but on the basis that rule provides a mechanical means for removing their names from the proceedings. This would be a cosmetic change to the face of Court documents, filed henceforth, to reflect the underlying reality that the third parties are not joined. They invite the Court to exercise the power in rule 6.04 in this way, because they were never joined in the first place, while contending the onus lies on the wife to establish why they should be added as parties, and she cannot discharge this onus. Their second position is that by reason of the wife’s breach of subrule 6.03(3), the proceedings should be dismissed as against them pursuant to rule 11.02(2).
In oral submissions, the wife made an Application for an order dispensing with subrule 6.03(3). She did not seek an extension time to comply. I will return to this below.
The debate here, however, primarily centred on rules 11.02 and 11.03. The wife argued that rule 11.02 has no Application. However, there appeared to be some confusion about whether the third parties relied on subrule 11.02(1) or (2). The wife directed submissions to subrule 11.02(1). The third parties relied on subrule 11.02(2)(a). The wife then seemed to assume that the Court would consider exercising the discretion in rule 11.03(1) to relieve her from an order made under subrule 11.02(2). For their part, the third parties argue that since non-compliance with rule 6.03 was conceded, an order for dismissal under rule 11.02(2)(a) should follow unless the Court exercised its discretion under rule 11.03.
Rule 11.02 is in the following terms:
(1) If a step is taken after the time specified for taking the step by these Rules, the Regulations or a procedural order, the step is of no effect.
Note: A defaulter may apply to the court for relief from this rule (see rule 11.03).
(2) If a party does not comply with these Rules, the Regulations or a procedural order, the court may:
(a) dismiss all or part of the case;
(b) set aside a step taken or an order made;
(c) determine the case as if it were undefended;
(d) make any of the orders mentioned in rule 11.01;
(e) order costs;
(f) prohibit the party from taking a further step in the case until the occurrence of a specified event; or
(g) make any other order the court considers necessary, having regard to the main purpose of these Rules (see rule 1.04).
Rule 11.03 in in the following terms:
Relief from orders
(1) A party may apply for relief from:
(a) the effect of subrule 11.02(1); or
(b) an order under subrule 11.02(2).
(2) In determining an application under subrule (1), the court may consider:
(a) whether there is a good reason for the non-compliance;
(b) the extent to which the party has complied with orders, legislative provisions and the pre-action procedures;
(c) whether the non-compliance was caused by the party or the party's lawyer;
(d) the impact of the non-compliance on the management of the case;
(e) the effect of non-compliance on each other party;
(f) costs;
(g) whether the applicant should be stayed from taking any further steps in the case until the costs are paid; and
(h) if the application is for relief from the effect of subrule 11.02(1)--whether all parties consent to the step being taken after the specified time.
Note 1: This list does not limit the powers of the court. See also subrule 1.12(3).
Note 2: A party may make an application under this rule by filing an Application in a Case or, with the court's permission, orally at a court event.
Subrule 11.02(1) is not relevant to this debate. The question is whether the Court should dismiss the wife’s claims against the third parties pursuant to subparagraph 11.02(2)(a). This subparagraph gives the Court a discretion to dismiss all or part of the wife’s case for non-compliance with the Rules. The third parties submitted that “[r]ule 11.02(2) provides a non-exhaustive list of the matters that the Court may have regard to when determining an application under [rule] 11.03(1). The Court’s discretion is otherwise unfettered and in the context of this case must necessarily include the lack of reasonable prospects of success.” I assume the reference to subrule 11.02(2) was meant to be a reference to subrule 11.03(2). The “list” in subparagraphs 11.02(2)(a) - (g) is list of the orders the Court may make once non-compliance is established. It is not a list of matters to be considered in the exercise of a discretion under rule 11.03.
However, in my view, the initial question is whether the discretion in subparagrpah 11.02(2)(a) should be exercised at all. Construing the wording of 11.02(2)(a) in accordance with its ordinary meaning, it is for the applicant for dismissal to demonstrate why the discretion should be exercised in their favour and why one or more of the specified orders should be made. In my view, only then does the need to consider whether rule 11.03 arises. This is clear from subparagraph 11.03(1)(b), which permits a party to apply for relief “from an order under subrule 11.02(2)”. Until such an order is made, there is nothing in respect of which such relief can be given. If an order is made under subrule 11.02(2), the onus then falls on the applicant for relief under subrule 11.03(1) to persuade the Court to grant relief.
The third parties advanced three reasons why the Court would not be persuaded they should be joined. Although these arguments address an otiose question because I have found their joinder is valid, I accept they are also relevant to the exercise of discretion under subrule 11.02(2). First, they say the wife’s claims against them have no reasonable likelihood of success. Secondly, they argue the wife’s Points of Claim do not ameliorate the failure to comply with rule 6.03 because they “replete with irrelevant, vague and scandalous allegations that do not appear to support any causes of action against any of the respondents”. Thirdly, it is suggested that the amendments to the wife’s case disclosed in her Points of Claim are substantial and involve new parties and new causes of action some three years and nine months after the commencement of proceedings, such that for case management reasons they should not be permitted.
The first two arguments can be considered together. The expression “no reasonable likelihood of success” is used in subparagraph 10.12(d), which permits the Court to make summary orders including orders dismissing a party’s case. Rule 10.12 is not expressly relied upon by the third parties, but their argument assumes the test for dismissal under subrule 11.02(2) is similar. I accept that the discretion in subrule 11.02(2) is broad and unfettered, and includes consideration of reasonable prospects of success. But, it has been observed that subparagraph 11.02(2)(a) embodies a discretion which, though similar to summary dismissal, should be distinguished from an application founded in rule 10.12(d). As O’Brien J pointed out in Patel and Noora [2019] FCWA 260 (“Patel”) at [30] - [35], summary dismissal under subparagraph 10.12(d) is determined by reference only to the evidence of the respondent to the Application. No such limitation applies to the proper consideration of an application for dismissal founded on subrule 11.02(2). On such an Application, the question of the Court’s exercise of discretion can be informed by the evidence of both parties. The proper application of the Rules, and the relevant exercise of discretion, fall to be considered in the context of the main purpose and the obligations of the parties and the Court to promote and achieve the main purpose.
The exercise of discretion in subparagraph 11.02(2)(a) can therefore also be informed by consideration of a pleading document such as the wife’s Points of Claim. The wife argued that no consideration of the merits of her claim against the third parties was necessary or permissible. I disagree, if by that submission she meant there should be no consideration of her prospects of success. It seems to me that the prospects of success of a defaulting party must be a relevant consideration in determining an application for dismissal pursuant to subparagraph 11.02(2)(a).
Accepting the exercise of discretion under subparagraph 11.02(2)(a) is distinguishable from a summary dismissal Application pursuant to subparagraph 10.12(d) in the respects identified in Patel, certain well known principles remain applicable. In Spencer v The Commonwealth [2010] HCA 28; (2010) 241 CLR 118 at [22] French CJ and Gummow J, when construing s 31A of the Federal Court of Australia Act 1976 (Cth), said the criterion of a “ reasonable prospect” of success has been understood “in analogous statutory settings to mean a “real” rather than “fanciful” prospect”, and the expression “no reasonable prospects of success” apply to the case in which the pleadings disclose “no reasonable cause of action and their deficiency is incurable.” Also apposite are the well-known propositions of Kirby J set out in Lindon v The Commonwealth (No 2) (1996) 136 ALR 251; [1996] HCA 14; at 256:
(a)It is a serious matter to deprive a person of access to the courts of law for it is there that the rule of law is upheld, including against government and other powerful interests. This is why relief, [under rules of court] or in the inherent jurisdiction of the Court, is rarely and sparingly provided;
(b)To secure such relief, the party seeking it must show that it is clear, on the face of the opponent's documents, that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious;
(c)An opinion of the court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant summary termination. Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment;
(d)Summary relief … for absence of a reasonable cause of action, is not a substitute for proceeding by way of demurrer. If there is a serious legal question to be determined, it should ordinarily be determined at a trial for the proof of facts may sometimes assist the judicial mind to understand and apply the law that is invoked and to do so in circumstances more conducive to deciding a real case involving actual litigants rather than one determined on imagined or assumed facts.
The Amended Initiating Application seeks relief under ss 78, 79, 85A and 106B of the Act. The relief sought under s 78 is for a declaration that Mr Q Malloy or the Malloy Group are liable to account to the husband for “the value of unpaid present entitlements of the husband.” As mentioned above, these unpaid entitlements were noted by Tree J to be at the heart of the wife’s case in Malloy & Stopford Malloy [2019] FamCA 986 at [3]:
At the heart of the wife’s case, are unpaid present entitlements (“UPEs”) said to be due and payable to the husband as a beneficiary under a number of trusts, of which some of the [Malloy] Group companies are trustees. She says that, to the extent that those trustees no longer have funds to satisfy the payment of those UPEs, their dealing with those funds is a traceable breach of trust, and to that end, seeks to identify the entities which presently hold them, so that they may be recovered, presumably now that the [Malloy] Group have been joined as parties, in these proceedings themselves.
The wife’s claim for relief under s 79, stated summarily, is for the discharge of liabilities and payment to her of various amounts of money. Her claim under s 85A, stated summarily, is for orders that the husband and the third parties take all necessary steps bring about the discharge of mortgages and transfer to the wife of certain properties, together with a just and equitable amount of money. The wife also claims relief pursuant to s 106B of the Act, setting aside of a payment of $320,615.01 by the husband to DD Pty Ltd on or about 7 August 2015, a mortgage entered into between the husband and DD Pty Ltd of the same date, and a range of resignations and appointments and dealings between the husband and various of the third parties on 2 April 2012.
The wife’s Points of Claim provide extensive particularisation of her allegations which are said to support the relief claimed in the Amended Initiating Application. I accept that the Points of Claim at times may stray beyond the strict parameters of pleading which may be applicable in jurisdictions where a cause of action is propounded through pleadings such as a statement of claim. However, that is not a compelling point of criticism; this Court has no clear parameters for pleading. The question is whether the Points of Claim disclose real and not fanciful contentions which constitute claims worthy of consideration at trial. Nor do I accept that the Points of Claim are “replete with irrelevant, vague and scandalous allegations” that do not support any causes of action against any of the third parties. On the contrary, the Points of Claim plead numerous allegations of material facts such as an Agreement, Arrangement or Understanding between the husband and Mr Q Malloy for himself and the Malloy Group in 2012 to provide to the husband “an income in the form of non-repayable loans and other supportive benefits” and the unpaid present entitlements of $4.5 million in the Malloy Group. The Points of Claim also plead estoppel, a joint venture and constructive trust arising from the 2012 transactions, the creation of a deliberate arrangement between the husband and his father to bring about apparently parlous financial circumstances for the husband and protect assets from the claims of the wife. The Points of Claim also allege that the unpaid present entitlements are property of the husband in the form of choses in action giving him rights in the administration of a number of trusts within the Malloy Group.
The wife’s case against the third parties is based on documents, which overwhelmingly have been extracted from the third parties themselves through Court processes. As already discussed above, the purpose of the third parties’ reliance on the evidence of Messrs GG and MM was to demonstrate the extent of their disclosure.
As articulated in the Points of Claim, the wife’s claims cannot be said to have no prospects of success against the third parties. The Points of Claim adequately set out her case against them and the husband. Her case is “real” and not “fanciful”. It is plain she seeks relief which, if made, will significantly affect property and interests of the third parties.
For these reasons, for the avoidance of doubt, I also find that the third parties are necessary parties within rule 6.02. I did not understand the submissions of the third parties expressly to contend otherwise.
Prejudice to the third parties is a relevant consideration. It is noteworthy that that they do not point to any prejudice to them from the wife’s non-compliance with rule 6.03. They pointed to her “breathtaking” and dismissive attitude to the requirements of the rule and lack of any explanation for her non-compliance; but they did not contend they were embarrassed or subject to any practical injustice. They did not argue they did not understand the case against them. On the contrary, they understood sufficiently to argue it had no prospect of success.
More importantly, it was the third parties themselves, in the correspondence dated 2 September 2019, who required a statement of claim in circumstances where the wife had failed to provide an affidavit which could comply with subrule 6.03(3): see above at [11]. They did not press for an affidavit. In that correspondence, no mention was made of “nullity”. This demonstrates clearly in my view that the third parties themselves perceived there was more utility in a pleading document such as the Points of Claim than an affidavit complying with subparagraph 6.03(3)(a) on which they now claim to place so much importance. This also provides an explanation for the absence of an affidavit. I am not satisfied the third parties suffered any prejudice by the wife’s breach of subrule 6.3(3) which would militate in favour of a dismissal of her claims against them.
As already noted, the third parties point to the fact that the amendments to the wife’s case disclosed in her Amended Initiating Application and Points of Claim are substantial. This much is true. They also say the amendments involve new parties and new causes of action some three years and nine months after the commencement of proceedings, and for case management reasons they should not be permitted. I do not accept this argument. The third parties have been closely, indeed intimately, involved in this litigation for many years, almost from the start. The particulars of the wife’s claims against them have been canvassed several times in hearings before different single judges of this Court, and the Full Court, as the history of the litigation given earlier in these reasons demonstrates. There is force in the wife’s submission that the third parties have consistently resisted production or disclosure of documentary material during the proceedings. This has been productive of some delay. The Amended Initiating Application was served on the third parties on 10 April 2019, nearly two years ago, while the Point of Claim were served on 15 July 2020, some eight months ago.
According to my conclusions about joinder, the third parties have been parties to the litigation since 10 April 2019. It cannot pass without comment that in his judgment delivered on 19 December 2019, referred to above, Tree J referred to the third parties as “already”, “freshly” or “recently” joined to the proceedings on numerous occasions: at [1], [3], [66], [92] and [96]. Tree J makes no reference to the third parties contesting this position, even though they appeared and made submissions to him. Quite apart from other aspects of the long history of these proceedings, in light of this, the present posture of the third parties, about rule 6.03 and joinder in the application the subject of this judgment, rings somewhat hollow.
In my view, the passage of time since 10 April 2019, and the extensive involvement of the third parties in the proceedings anyway, their role as necessary parties because their interests may be directly affected by final property adjustment orders between the wife and husband, and the long history of the proceedings in the Court, mean case management considerations in fact militate in favour of allowing the amendments to progress with the third parties clearly added as parties to the proceedings to achieve finality in this litigation.
Having decided the joinder of the third parties is not a nullity, that her claims against the third parties cannot be said to have no prospect of success, and they are necessary parties, that the main purpose of the Rules is promoted by the third parties being parties to the proceedings, and they have not been prejudiced by the wife’s failure to comply with rule 6.03, I am not persuaded the third parties have demonstrated a basis to exercise the discretion in subparagraph 11.02(2)(a) to dismiss the wife’s case against them. This conclusion makes it unnecessary to consider exercise of the discretion in rule 11.03.
I also decide that for the same reasons that I would not exercise the discretion to dismiss the proceedings pursuant to rule 11.02(2), I would also exercise the Court’s discretion to dispense with the requirements of rule 6.03(3). The third parties submitted, correctly, the discretion to dispense with the requirements of rule 6.03 had to be exercised judicially. However, I accept the submission of the wife that compelling compliance with this rule now in the circumstances of this case would be unnecessarily burdensome, and provide nothing additional by way of procedural fairness to the third parties beyond what has already been provided by the wife. As Wilson J said in Sigley “[n]o particular utility is served in requiring [the joining party] to go on oath in an affidavit merely to recite her contentions or propositions supporting the joinder.”
I will dismiss the application of the third parties.
COSTS
The final hearing of this matter is listed to commence on 3 May 2021. In light of the proximity of the final hearing, I will reserve the question of the costs of the application the subject of this judgment.
I certify that the preceding eighty-one (81) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 8 March 2021
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