Warin & Warin (No 7)
[2022] FedCFamC1F 489
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Warin & Warin (No 7) [2022] FedCFamC1F 489
File number(s): MLC 7368 of 2020 Judgment of: WILSON J Date of judgment: 7 July 2022 Catchwords: FAMILY LAW – PRACTICE & PROCEDURE – joinder application – joinder granted. Legislation: Corporation Act (2001) Cth s 601AD
Family Law Act (1975) Cth ss 79 and 106B
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 r 3.01
Cases cited: Barnes v Addy (1874) LR 9 Ch App 244
Warin & Warin [2020] FamCA 796
Warin & Warin (No 2) [2021] FamCA 483
Warin & Warin [2021] FedCFamC1F 269
Warin & Warin (No 2) [2021] FedCFamC1F 310
Warin & Warin (No 3) [2021] FedCFamC1F 372 Warin & Warin (No 4) [2022] FedCFamC1F 160 Warin & Warin (No 5) [2022] FedCFamC1F 452
Warin & Warin (No 6) [2022] FedCFamC1F 457
Lazarus Estates Limited v Beasley [1956] 1 QB 767
Division: Division 1 First Instance Number of paragraphs: 26 Date of hearing: 6 July 2022 Place: Melbourne Solicitor for the Applicant: Vadarlis & Associates Solicitor for the First and Third Respondents: Sebastian Rubera & Associates Solicitor for the Second Respondent: Maddocks Lawyerps Solicitor for the Fourth Respondent: McNab and Associates 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 another named in the Schedule)
Third Respondent
ORDER MADE BY:
WILSON J
DATE OF ORDER:
7 JULY 2022
THE COURT ORDERS THAT:
1.The applicant has leave to join BB Nominees Pty Ltd as the fifth respondent to this proceeding.
2.The applicant has leave to join Mr CC as the sixth respondent to this proceeding.
3.On or before 4:00pm on 8 August 2022 the applicant must file and serve her second further amended statement of claim to a standard appropriate to a proceeding in the Federal Court of Australia, fully particularised.
4.The further hearing of this proceeding is adjourned for directions at 9:30am on 10 August 2022, by which date the statement of claim should have been filed and served.
5.Costs are reserved.
6.Applications returnable on 4 and 8 August 2022 are adjourned to 10 August 2022.
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 the pseudonym Warin & Warin is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
WILSON J:
INTRODUCTION
By application in a proceeding dated 1 July 2022 and returnable on 6 July 2022, the applicant sought orders for the joinder of BB Nominees Pty Ltd and its controlling and effective mind, Mr CC.
Mr McNab, who appeared for the parties proposed to be joined, told me his client received an email by way of service, at 8:30am yesterday morning, of the application and supporting documents. However, Mr McNab appeared before me in person and made very helpful submissions, taking no point about short service.
The bankrupt’s trustee-in-bankruptcy appeared before me, as did Mr Rubera, who announced his appearance on behalf of Ms Inston, the third respondent.
In broad overview, the applicant seeks orders joining BB Nominees Pty Ltd and Mr CC as the new fifth and sixth respondents. The applicant contends that during her marriage to the first respondent, the husband owned and operated a company, the number of which was …, Warin Nominees Pty Ltd. That company was incorporated in late January 2004. Her husband was, at all relevant times, the sole shareholder of Warin Nominees Pty Ltd.
For reasons that follow, orders for the joinder of BB Nominees Pty Ltd and Mr CC must be made.
BACKGROUND
This proceeding was commenced in mid-July 2020. Two days later, the husband presented his own petition in bankruptcy, leading to Mr Basfield’s appointment as the bankrupt’s trustee-in-bankruptcy. Mr Basfield became the second respondent in this proceeding.
Among the many contentions in this litigation is the applicant’s assertion that the third respondent, Ms Inston, who is now the bankrupt’s domestic partner, became the registered proprietor of real estate in D Town after paying the vendor of that property $2.38 million. The wife alleges that Ms Inston’s income and accumulated assets were too modest for her to acquire the D Town property from her own sources of financial accommodation and that instead, Ms Inston executed the contract to purchase the D Town property and obtained mortgage finance for the acquisition of that property after representing to the mortgagee that she had savings of $1.6 million. The wife asserts that in truth, the husband’s former accountant, one Mr Winsor, and the company controlled by the bankrupt’s son, H Pty Ltd, advanced amounts by way of loan to Ms Inston to enable her to borrow from the mortgagee and thereby acquire the D Town property becoming the registered proprietor of it. The wife asserted that the funds provided by Mr Winsor and H Pty Ltd were derived from the marriage and are funds to which the wife has a joint entitlement and an interest pursuant to section 79 of the Family Law Act. The wife asserts that Ms Inston holds her interest in the D Town property on trust for the wife.
Warin Pty Ltd was joined as the fourth respondent on 17 December 2021. As was recorded in my reasons handed down on 22 December 2021, Warin Pty Ltd was joined as the fourth respondent on 17 December 2021 when orders were made requiring certain payments to be deposited into a controlled money account. In the most recent version of the applicant’s statement of claim, she asserted that on 17 October 2017, when the husband and wife were still married and prior to their separation on 2 August 2018, the bankrupt voluntarily deregistered Warin Pty Ltd. The wife asserts that the bankrupt procured the deregistration of Warin Pty Ltd in his capacity as the sole director of that company. She asserted that Warin Pty Ltd was a wholly owned subsidiary of Warin Nominees Pty Ltd.
Pausing at that juncture, according to the undisputed chronological factual sequence of events, the bankruptcy of the first respondent took effect upon the presentation of his own petition, that is to say on 17 July 2020. On that day, he ceased to have powers under the Corporations Act to act as a director of the company. Under the Bankruptcy Act, on and from that date, the bankrupt ceased to have power to deal with assets that vested in the bankrupt’s trustee. Shares owned by him were in that category. Precisely how he had power to resign as a director of Warin Nominees Pty Ltd on 18 July was not explained.
Upon his assuming the status of a bankrupt, one would be entitled to assume that by operation of law, he forfeited his status as a director of all companies he directed prior to the presentation of his own petition in bankruptcy. At all events, that was not debated before me so it is not appropriate for me to say any more now and so I do not.
Returning to the dramatis personae, once Warin Pty Ltd had been joined, Mr CC filed two affidavits, one made on 12 January 2020 and the other on 1 March 2022. It is necessary to examine each. Relevantly synthesised in his 12 January 2022 affidavit, Mr CC deposed to the following –
(a)he met the bankrupt when Mr CC was a director of FF Company and the bankrupt, then not a bankrupt, was a substantial customer with whom Mr CC became personally acquainted;
(b)after selling the FF Company business, Mr CC commenced business as a business consultant and short-term lender;
(c)Mr CC introduced the bankrupt to insolvency practitioners following issues arising between the bankrupt and GG Company;
(d)“because of a third party objecting to the ATOs assessment of tax on a development that Warin was involved in, a real possibility was presented to the company to receive a refund from the 2014 financial year, plus interest from the ATO” (Mr CC);
(e)in August 2020 or thereabouts, a man called Mr HH, of an accountancy firm called Abound, approached Mr CC and recommended that Mr CC seek the reinstatement of the registration of Warin Pty Ltd, which application Mr CC duly made;
(f)after the reinstatement application was issued and served, the bankrupt’s trustees’ solicitors contacted Mr CC’s solicitors concerning payment of the sum of $102,000 from the parties’ joint ANZ account to the Australian Taxation Office in respect of a tax debt owed by Warin Pty Ltd to the ATO; and
(g)if the tax refund is not received by Warin Pty Ltd, that company is technically insolvent.
Several things must be said of the information in that affidavit. First, the bankrupt became bankrupt on 17 July 2020. Second, his powers to deal with the affairs of Warin Pty Ltd were in real doubt after the presentation of his own petition in bankruptcy. Third, several years earlier in late October 2017, Warin Pty Ltd had been deregistered and, pursuant to section 601AD of the Corporation Act, its assets vested in the Commonwealth of Australia or in the Australian Securities and Investment Commission. Fourth, an order reinstating the registration of Warin Pty Ltd was not made until 13 September 2021.
Mr CC did not explain how he asserted he had the requisite standing to seek the reinstatement of Warin Pty Ltd. One of the issues that must await trial is the full factual setting in which Mr CC came to be involved with Warin Pty Ltd. His affidavit did not explain the circumstances in which the bankrupt came to discuss with Mr CC the deregistration of Warin Pty Ltd, its financial condition when deregistered, how some tax refund emerged, how Mr CC could seek to obtain the benefit of that refund, the documents the ATO were requiring execution before the refund would be paid, why the sum being paid was in fact a refund and how Mr CC asserted some entitlement to that amount. Mr CC also did not address the role of the applicant in her challenge to Mr CC’s receipt of the ATO funds, nor did he depose to the application before me in late December 2021. The position was no better illuminated by the affidavit of Mr CC made 1 March 2022 in which he deposed to the payment of $112,272.48 into the controlled money account.
According to the wife’s affidavit made 1 July 2022, ASIC records derived from a search of Warin Nominees Pty Ltd conducted on 17 August 2020 revealed that the bankrupt resigned as the sole director and secretary on 18 July of 2020 and, on the same day, the bankrupt’s share in Warin Nominees Pty Ltd was transferred to Mr CC. Precisely how the bankrupt was able to transfer the share that he owned in that company prior to his bankruptcy to Mr CC subsequent to his bankruptcy went unexplained.
At all events, the wife also deposed to the name of Warin Nominees Pty Ltd being name changed to BB Nominees Pty Ltd on 15 September 2020. That was after the bankrupt presented his own petition in bankruptcy. It was arguable that he had no power to change the company’s name. His shareholding in Warin Nominees Pty Ltd arguably may have been assumed by the trustee-in-bankruptcy, although no point was debated before me on that issue.
According to the wife, Warin Nominees Pty Ltd was the shareholder in Warin Pty Ltd prior to the deregistration of Warin Pty Ltd.
It was common ground as between Mr Vadarlis for the wife and Mr McNab for Mr CC that no consideration was paid for Mr CC’s acquisition of the shares in Warin Pty Ltd.
THE APPLICANT’S FURTHER AMENDED STATEMENT OF CLAIM
On 6 July 2022 when this proceeding was last before me, the most recent iteration of the wife’s statement of claim had been prepared. That document has evolved over time and even now emerges as an organic document that is being moulded as this case unfolds at an evidentiary level. Mr McNab quite properly pointed out that the case had been before me on not less than 27 prior occasions. He omitted to point out that in this litigation, I have published eight sets of reasons for judgment[1] with the promise of many to come, all ahead of the trial. Mr McNab submitted that the funds in the controlled money account are dwindling and if his clients are joined, their expenditures will escalate, further diminishing the sum to which they may have recourse from the controlled money account.
[1] Warin & Warin [2020] FamCA 796, Warin & Warin (No 2) [2021] FamCA 483, Warin & Warin [2021] FedCFamC1F 269, Warin & Warin (No 2) [2021] FedCFamC1F 310, Warin & Warin (No 3) [2021] FedCFamC1F 372, Warin & Warin (No 4) [2022] FedCFamC1F 160, Warin & Warin (No 5) [2022] FedCFamC1F 452 and Warin & Warin (No 6) [2022] FedCFamC1F 457.
Conversely, Mr Vadarlis submitted that all necessary parties should be before the court. The question was whether Mr CC and BB Nominees Pty Ltd should be joined. The answer resides in rule 3.01 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 which provides as follows –
A person whose rights may be directly affected by an issue in a proceeding, and whose participation has the party is necessary for the court to determine all issues in dispute in the proceeding, must be included as a party to the proceeding.
The touchstone for inclusion is two-fold. The first is that the proposed parties are persons whose rights may be directly affected by an issue in the proceeding. The second is that the participation of that party is necessary for the court to determine all issues in dispute in the proceeding. If the answer to both questions is in the affirmative, rule 3.01 mandates that such person be included as a party to the proceeding. The word “must” is used. The court has no choice in the matter.
According to the further amended statement of claim, the rights of Mr CC and the rights of BB Nominees Pty Ltd may directly be affected by an issue in the proceeding. While the further amended statement of claim calls for further improvement, the issues raised against BB Nominees Pty Ltd are set out in part C, leading to a claim that enlivened section 106B of the Family Law Act. The bases on which the wife relies is set out in paragraphs 46, 47, 48 and 49 of the further amended statement of claim, one of which is fraud. Mr Vadarlis submitted that in reliance upon Lord Denning’s statement in Lazarus Estates Limited v Beasley,[2] fraud unravels everything. However, he did not say whether the fraud alleged is equitable fraud, statutory fraud or common law fraud.
[2] [1956] 1 QB 767.
As against Mr CC, the allegations involving him are set out in paragraphs 43, 44, 45(c), 45(e) and inferentially, 48 and possibly 49. Mr Vadarlis also argued that a claim premised under the rule in Barnes v Addy,[3] may also exist. If so, none has yet been articulated. If one is to be advanced, it must be articulated in a pleading. The fraud allegations must also be properly articulated. They are not presently.
[3] (1874) LR 9 Ch App 244.
While I am persuaded that leave to join Mr CC and BB Nominees Pty Ltd should be ordered, I am also further persuaded that –
(a)the further amended statement of claim needs wholesale revamping; and
(b)until that is done, any application for a disclosure order against those parties must await the reformulation of the second further amended statement of claim which I order be filed and served by not later than 4:00pm on 8 August 2022, that is to say 30 days from today.
Many of the existing paragraphs are narrative in nature, properly the province of particulars, but not the province of material facts that must be pleaded and in due course proved as part of the wife’s causes of action alleged, especially in relation to fraud.
In those circumstances I make the following orders –
(a)the applicant has leave to join BB Nominees Pty Ltd as the fifth respondent to this proceeding;
(b)the applicant has leave to join Mr CC as the sixth respondent to this proceeding;
(c)on or before 4:00pm on 8 August 2022 the applicant must file and serve her second further amended statement of claim to a standard appropriate to a proceeding in the Federal Court of Australia, fully particularised;
(d)the further hearing of this proceeding is adjourned for directions at 9:30am on 10 August 2022, by which date the statement of claim should have been filed and served;
(e)costs are reserved; and
(f)applications returnable on 4 and 8 August 2022 are adjourned to 10 August 2022.
The existing pleading has served its purpose to date, but it remains a patchwork quilt for purposes beyond today and consideration should be given to starting from scratch, adopting sequentially numbered paragraphs, rather than, for example, part C, paragraphs 45A, 45B, 45C, 45D and 45E and where appropriate specific relief directed to specific factual paragraphs.
I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Wilson . Associate:
Dated: 8 July 2022
SCHEDULE OF PARTIES
MLC7368 of 2020 Respondents
Fourth Respondent:
WARIN PTY LTD
0
8
0