Warin & Warin (No 10)
[2023] FedCFamC1F 943
•31 October 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Warin & Warin (No 10) [2023] FedCFamC1F 943
File number MLC 7368 of 2020 Judgment of WILSON J Date of judgment 31 October 2023 Catchwords FAMILY LAW – PRACTICE & PROCEDURE – amendment application – trial under way – application granted Legislation Family Law Act 1975 (Cth) s106B Cases cited Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
Barnes v Addy (1874) LR 9 Ch App 244
Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373
Paviello & Paviello [2022] FedCFamC1F 592
Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449
Velten & Velten [2020] FamCA 384
Division Division 1 First Instance Number of paragraphs 12 Date of hearing 30 and 31 October 2023 Place Melbourne Counsel for the applicant Dr R Ingleby Solicitors for the applicant Vadarlis & Associates Counsel for the first respondent Mr C Tesoriero Solicitors for the first respondent Fair Family Law Solicitors for the second respondent No appearance by or on behalf of the second respondent Counsel for the third respondent Mr S Rubera Counsel for the fourth, fifth and sixth respondent Mr D Sweeney Solicitors for the third and fourth respondent Sebastian Rubera & Associates Solicitors for the fifth and sixth respondent Diamonds Counsel for the seventh respondent Mr A Robinson Solicitors for the seventh respondent Rothwell Lawyers ORDERS
MLC 7368 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN MS WARIN
Applicant
AND MR WARIN
First respondent
MR STANTON & MR BASFIELD IN THEIR CAPACITY AS TRUSTEES IN BANKRUPTCY OF THE BANKRUPT ESTATE OF THE RESPONDENT HUSBAND
Second Respondent
MS INSTON (and others named in the Schedule)
Third respondent
ORDER MADE BY
WILSON J
DATE OF ORDER
31 OCTOBER 2023
THE COURT ORDERS THAT –
1.The applicant is granted leave to amend the statement of claim.
2.The seventh respondent is granted leave to file her response to paragraph 43 of the amended statement of claim by 10 am on Wednesday 1 November 2023.
3.The seventh respondent's reply to paragraph 43 of the amended statement of claim must be circulated to all parties by 10am on 1 November 2023.
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 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym of Warin & Warin has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
WILSON J
Two days of the trial in this proceeding have been consumed with openings. On the first day, Dr Ingleby for the applicant indicated that he wished to introduce a new paragraph 43 to the latest version of the statement of claim upon which the applicant has gone to trial. The proposed amendment reads as follows –
Further or in the alternative the sum of $200,000 was received by the seventh respondent into her possession in circumstances where she –
(a)had actual knowledge that the property was the property of the parties to the marriage and subject to an implied intention constructive trust; and/or
(b)wilfully shut her eyes to that fact; and/or
(c)wilfully refused to make inquiries; and/or
(d)had knowledge of the circumstances which would indicate a breach of trust.
Dr Ingleby informed me that that pleading was intended to take effect as a claim under either limb of the rule in Barnes v Addy[1] and it was intended to capture the movement of the sum of $200,000 received by the seventh respondent, albeit briefly, before that money was applied to a firm of solicitors, the fate of which is not easy to distil from the documentation in the proceeding. Dr Ingleby informed me, and it appears reasonably evident thus far, that discovery has been difficult in this case because the parties have been less than diligent in their compliance with the duties about which I have written many times, not the least of which in Paviello & Paviello[2] and also in a case called Velten & Velten.[3]
[1] Barnes v Addy (1874) LR 9 Ch App 244.
[2] Paviello & Paviello [2022] FedCFamC1F 592.
[3] Velten & Velten [2020] FamCA 384.
Most of the first day of the trial in this proceeding was consumed by a very close examination of 190 entries of a chronology, commencing relevantly from 1999 upon the incorporation of RR Pty Ltd to the events of 29 April 2022 in which the third respondent was associated with a deed of variation of a loan. The financial arrangements in this case are exceptionally complicated. Dr Ingleby informed me that he will be contending that, in large measure, many of the transactions that appear to have a face of regularity are in truth shams for the purposes of cases such as Sharrmant v Official Trustee in Bankruptcy.[4]
[4] Sharrmant v Official Trustee in Bankruptcy (1988) 18 FCR 449.
At the end of all parties' openings Mr Robinson for Ms E contended that no useful purpose was served by granting leave to the applicant to amend paragraph 43 in the way in which Dr Ingleby contended. He said that the pleading in the proposed paragraph 43 was defective in the sense that it did not address the requisite elements of a Barnes v Addy[5] claim, especially as to states of mind, knowledge and elements that would otherwise ground a constructive trust. There may be truth in that, but for the fact that the applicant has been denied the ordinary advantages that litigants enjoy in this court, or should enjoy, by due and dutiful discharge of their duties of disclosure. This case has been punctuated by significant and serious deficiencies of disclosure.
[5] (1874) LR 9 Ch App 244.
On day two of the trial, the trustee in bankruptcy had chosen not to participate in the proceeding despite the openings raising very significant issues about the conduct of the bankruptcy which I would have expected the trustees to explain. However, the trustees have failed to respond to emails from the court inviting participation. Therefore, issues in the bankrupt’s administration will be largely left to the construction of documents but not to direct evidence from the trustees, a lamentable state of affairs. Returning to the sum of $200,000, the evidence about the movement of that money was the subject of Ms E's evidence, in essence she said that she was directed by her husband to apply the amount of $200,000 into her account because her husband, a practising accountant, did not maintain a bank account into which the money could be deposited.
The money was intended for another. Ms E deposed to complying with the request made of her to deposit the money which she did albeit for a short time and the money was disbursed thereafter. Dr Ingleby on behalf of the applicant construed that set of circumstances as a wilful shutting of Ms E’s eyes to the circumstances of receiving the money as well as a wilful refusal to make inquiries about the source of the funds, the purpose to which the money was to be applied, and for that matter, very much anything else associated with the transaction. That enlivened the considerations of cases such as Barnes v Addy[6] and Consul Developments[7] to name but a few.
[6] Ibid.
[7] Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373.
Ordinarily a party is required to plead to information concerning the state of a person's mind. Here the extent of the disclosure has impeded the applicant very considerably in her capacity to do those things. It was said that on the second day of the trial, principles espoused by the High Court in Aon Risk Services Australia Ltd v Australian National University[8] should preclude a party from making amendments on the run, especially where the reason for the amendments are unexplained. I do not share the view that the reasons for the amendments are unexplained.
[8] Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175.
It is readily apparent that the applicant has done the best she can to distil a much tangled set of circumstances and to present the case in a way that is coherent and which trace an amazingly complicated façade of corporate structures, inter-positioning of companies having no apparent connection to transactions and to otherwise inexplicable movements of funds over a reasonably short period of time for the purpose of enabling the third respondent to become the registered proprietor of land at B Street, D Town.
This case did not have the benefit of a comprehensive forensic accountancy analysis as one would ordinarily see in cases in the Major Complex Financial Proceedings List. But that is for the very good reason that the applicant has not been sufficiently funded to engage in that activity and the legal representatives for her have done their best to pull together the tangled threads of an appallingly interconnected and seemingly indecipherable set of transactions to make good what they can. To my mind, the evidence given by Ms E, that she was asked by her husband to receive $200,000 and without explanation simply received that money deposited it and otherwise complied with her husband's insistence upon her receipt of the money calls for explanation. Human experience should be such that an amount as large as that would warrant at least some investigation by the recipient by way of understanding where the money came from, why it was being deposited into the account of a person having no apparent connection to this litigation and why it was lodged in that account for a seemingly short time and then disbursed to other sources.
Whether or not that amounts to an implied intention constructive trust is something else upon which I had best say nothing more at this stage. However, it seems to me that the facts cry out for explanation beyond what the seventh respondent has said so far, namely that she does not know why she was being called upon to receive that money and what the background circumstances were. That very may well amount to an arguable case that she wilfully shut her eyes or wilfully refused to make inquiries. It may also indicate that the money was in fact impressed with a trust such that she received money obtained in breach of trust according to the first limb of Barnes v Addy.[9] It might even be as seemingly innocuous as her knowing participation in the receipt and movement of money obtained in breach of trust.
[9] (1874) LR 9 Ch App 244.
Those seem to me to be issues for trial. At this stage, while I understand that there may not be circumstances that enliven a claim under section 106B of the Family Law Act, there may at this stage be an arguable case for the enlivening of one of the two limbs in Barnes v Addy.[10] I am not willing to dismiss the proceeding against Ms E at this stage and I therefore propose to grant the amendment giving leave to the seventh respondent to respond within a time that enables the forward movement of this case to not be delayed. In those circumstances, it being 3pm today, I will permit the seventh respondent to file her response to paragraph 43 by 10am tomorrow morning and I require that pleading to be circulated to all at the bar table, as well as being filed with the court.
[10] Ibid.
The seventh respondent may very well succeed in defending the legal and factual basis for the amendment. If she is successful in that, she will have her remedies in costs as may well be usual and I say nothing more about that at this stage.
I certify that the preceding twelve (12) numbered paragraphs are a true copy of the reasons for judgment of the Honourable Justice Wilson. Associate:
Dated: 31 October 2023
SCHEDULE OF PARTIES
MLC 7368 of 2020 Respondents
Fourth respondent
WARIN PTY LTD
Fifth respondent
BB NOMINEES PTY LTD
Sixth respondent
MR CC
Seventh respondent
MS E
0
5
1