Warin & Warin (No 9)

[2023] FedCFamC1F 538

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Warin & Warin (No 9) [2023] FedCFamC1F 538

File number

MLC 7368 of 2020

Judgment of

WILSON J

Date of judgment

30 June 2023

Catchwords

FAMILY LAW – JOINDER APPLICATION – allegations that four transactions each of $50,000, made to the proposed party from the husband, form part of the matrimonial property pool – transactions were not adequately explained by the proposed party – held, the proposed party is joined as a respondent to this proceeding.   

Cases cited

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175

Toma & Doyle (No 2) [2023] FedCFamC1F 477

John Alexander’s Clubs Pty Ltd v White City Tennis Club (2010) 241 CLR 1

Division

Division 1 First Instance

Number of paragraphs

39

Date of last submission

30 June 2023

Date of hearing

26 & 30 June 2023

Place

Melbourne

Solicitor for the applicant

Mr E. Vadarlis of Vadarlis & Associates

Solicitor for the first respondents

Mr G. Johns of Fair Family Law

Solicitor for the third respondents

Mr S. Rubera of Sebastian Rubera & Associates Pty Ltd

Solicitor for the fourth, fifth and sixth respondents

Mr B. McNab of Diamonds Solicitors

Counsel for the prospective respondent

Mr C. Horsfall

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
Third Respondent (and others named in the Schedule)

AND

MS E
Prospective Respondent

order made by	WILSON J
DATE OF ORDER	30 JUNE 2023

THE COURT ORDERS THAT –

1.Leave is granted to the wife to join Ms E as a respondent to this proceeding in the form of the wife’s second further amended initiating application.

2.The wife must file and serve on all parties by noon on 7 July 2023 the second further initiating application.

3.By noon on 7 July 2023, the wife must serve on Ms E the second further amended initiating application, together with a copy of all other documents filed to date, unless the solicitors for Ms E inform the wife’s solicitors that service of such additional documentary material is not required.

4.By noon on 7 July 2023, the wife must file and serve her further amended statement of claim.

5.All respondents must file and serve their responses to the wife’s second further amended initiating application and her further amended statement of claim by noon on 7 August 2023.

6.Ms E must give disclosure of all documents referable to the sum of $200,000 by 4:00pm on 28 July 2023.

7.I adjourn the further hearing of this proceeding for mention at 10:00am on 1 September 2023.

8.Costs of this application are 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 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 has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

EX TEMPORE REASONS FOR JUDGMENT

WILSON J

1. The trial of this proceeding is fixed to commence on 30 October 2023. 

2. This case has been before me and other judicial officers for interlocutory applications on not less than 29 separate occasions. 

3. On 30 May 2023, the applicant applied for orders for the joinder of Ms E and for orders requiring Ms E to give disclosure in relation to four payments, each of $50,000, made by the husband between 23 and 29 January 2019.

4. Ms E resisted the wife’s joinder application, contending that the application for Ms E’s joinder had been made inexcusably late and without adequate explanation for such lateness.[1]  She also argued that she had deposed to the fate of the $200,000 that she once received, and therefore, she should not be made a party to this litigation so as to give evidence on a point already covered.

   [1] Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175

5. The first respondent did not wish to be heard on this application.  On behalf of the third respondent, Mr Rubera submitted that the order for the joinder of Ms E was not “necessary” within the contemplation of rule 3.01 as recently explained in Toma & Doyle (No 2).[2]  On behalf of the fourth, fifth and sixth respondents, Mr McNab did not advance substantive submissions either in favour of or in opposition to the wife’s application.

   [2] [2023] FedCFamC1F 477.

6. One of the main issues before me was whether it was necessary to make an order for the joinder of Ms E in order to finally determine all issues in this litigation.  In the wife’s proposed second further amended initiating application for which no order granting leave to file and serve has yet been made, Ms E’s connection to the sum of $200,000 is set out in paragraphs 9A to 9C.  The wife seeks a declaration that the sum of $200,000 paid by the husband to Ms E between 23 January 2019 and 29 January 2019 constitutes and forms part of the matrimonial pool of assets.  In paragraph 9B, the wife sought orders that Ms E pay to the husband and to the wife the sum of $200,000 in such proportions as is determined.

7. Direct relief is sought against Ms E.  She is a stranger to the matrimonial relationship.  The High Court held in John Alexander’s Clubs Pty Ltd v White City Tennis Club[3] that whenever a court is invited to make orders directly affecting the rights and liabilities of a non-party, the non-party is a necessary party and ought to be joined.

   [3] (2010) 241 CLR 1, (at [131]).

8. In support of this joinder application, the wife relied on the evidence of her solicitor, Eric Vadarlis, who made an affidavit on 15 May 2023 and a further affidavit on 18 May 2023.  In his 15 May 2023 affidavit, Mr Vadarlis deposed to the following matters relevant to this joinder application –

   (a)the wife has led evidence that she and the first respondent separated in August 2018;

   (b)the husband has deposed that he presented his own petition in bankruptcy in July 2020, that is to say, three days prior to the first return of the wife’s initiating application in this proceeding;

   (c)the husband’s trustee-in-bankruptcy gave disclosure which revealed that the husband made four payments to Ms E, each of $50,000, in the period 23 to 29 January 2019;

   (d)the husband’s trustee in bankruptcy wrote to Ms E on 30 September 2021 seeking information about those four payments, as those payments appeared to be advances under a loan as between the husband and Ms E or they were voidable transactions;

   (e)the trustee-in-bankruptcy received no reply to the correspondence with Ms E;

   (f)on instructions provided from the wife, Mr Vadarlis asserted that the four payments by the husband to Ms E were made from the matrimonial pool following separation having the effect of diminishing the pool of assets for division in this case; and

   (g)the wife had no knowledge of those four payments totalling $200,000.

9. To his 18 May 2023 affidavit, Mr Vadarlis exhibited a bank statement from ANZ Bank in the sole name of the husband in which the four impugned payments by the husband to Ms E are recorded, aggregating $200,000. 

10. In the course of argument before me, I asked Mr Vadarlis what the evidence revealed in relation to Ms E’s receipt and retention, or disposal, of some or all of the $200,000.  Mr Vadarlis said it was very unclear from the evidence precisely what happened to the $200,000.

11. Some insight was given from the information in the affidavit of Ms E sworn 20 June 2023 as to the fate of the $200,000.  In that affidavit –

    (a)Ms E admitted receiving each of the four payments of $50,000 on or about the dates alleged;

    (b)after she received the payments, she paid them to MM Pty Ltd, formerly RR Pty Ltd; and

    (c)she no longer holds any part of those funds.

12. Ms E exhibited a joint venture agreement to her affidavit.  She was not a party to that agreement.  It was made between SS Pty Ltd, RR Pty Ltd and the husband, bearing a date in September 2015.  The husband was not a bankrupt on that date.  SS Pty Ltd is described in the agreement as the first party, RR Pty Ltd as the second party and the husband as the guarantor.  The document styled Joint Venture Agreement is not readily to be construed.  No definitional section appears in the document, even though the agreement purports to record a collection of defined terms.  Clause four states that “display homes” are mentioned in a schedule yet the agreement has no schedule attached to it.  No statement is recorded setting out precisely what each joint venturer is to do in pursuance of the so-called joint venture allegedly constituted by the agreement.  Clause seven records that the parties will prepare a budget and business plan although the date by which any such budget and business plan was to be prepared was not stated nor were the contents of the plans set out.  Clause eight required in mandatory terms the parties to follow “the programme”, yet the “programme” they were required to follow was not spelled out.  The project mentioned in clause fourteen was not defined yet the parties were required to ensure in mandatory terms that the joint venture, whatever that meant, had sufficient working capital to conduct the project.

13. The execution page revealed that the signatories of each party were the same, namely, the husband, described as “the guarantor”.  There was nothing in the nature of a guarantee anywhere in the joint venture. 

14. Mr Vadarlis put his client’s case on the basis that Ms E presently holds the sum of $200,000.[4] 

    [4] T 7 L 4 transcript 26 June 2023.

15. Mr Vadarlis submitted that the joint venture agreement is a sham and a nullity.  He said no guarantee was involved.  He said Ms E is not a party to the joint venture.

16. The version of events given by Ms E about the circumstances of her receipt of the sum of $200,000 and her alleged disposal of that sum must be recorded.  Between paragraphs 12 and 16 of her affidavit, Ms E commented on the wording of various clauses of the joint venture agreement, none of which was probative by her.  The relevant statement by her emerged at paragraph 17 of her affidavit.  She deposed in that paragraph to the following –

    “In January 2019, the exact date I can no longer recall, [MM Pty Ltd] directed the first respondent to make payments into my bank account.  I was always aware that those payments were to be made to but for the benefit of [MM Pty Ltd] pursuant to business arrangements between the parties.  This was notwithstanding I was a guarantor on the NAB account.”

17. She said her husband did not have a bank account in 2019 and that the husband directed MM Pty Ltd.  She said she paid the money to MM Pty Ltd in accordance with some direction. 

18. Mr Winsor has been from 2014 to date a director of MM Pty Ltd. 

19. It is relevant to observe that Ms E did not explain how she was capable of making the statement she did in her affidavits from her personal knowledge.  At no time did she say she was an officer of MM Pty Ltd.  Despite that, she purported to narrate that –

    (a)in 2019, MM Pty Ltd directed the husband to pay her $200,000;

    (b)she knew those funds were for the benefit of MM Pty Ltd, although she gave no basis for saying that the funds were for the benefit of MM Pty Ltd; and

    (c)the payment of $200,000 was pursuant to a business arrangement between the parties, although she gave no details whatever of the content of those arrangements.

20. The information in paragraph 17 of her affidavit caused me to become highly suspicious about the legitimacy of the transfer of $200,000 from the husband to her allegedly for the benefit of MM Pty Ltd.  The husband could have paid MM Pty Ltd direct.  Her statement that Mr Winsor did not have a bank account in 2019 seemed improbable as he was a practising finance professional.  She gave very little in the way of detail about the alleged direction given to her to receive the sum of $200,000.  She said nothing about why she was being called upon to receive that amount.  It was a large amount in total.  She did not produce any documentation to verify her statement that she physically transferred the sum of $200,000 to MM Pty Ltd “as directed”.  Who gave that directive was not stated.  Precisely why the money went to her in the first place and then out again was not said.  The commercial rationale for those transactions of receipt and transfer of funds was scarcely explained in a cogent manner.

21. Mr Winsor made an affidavit in relation to the transfer of $200,000.  It was dated 22 June 2023.  He purported to explain the commercial relationship between MM Pty Ltd and TT Company, the latter of which is in liquidation.  He exhibited a joint venture agreement and offered a layperson’s construction of some of its provisions, being as unhelpful as it was devoid of probative benefit.  He deposed to the existence of guarantees given by him and Ms E, yet he did not exhibit them.  Those guarantees were referable to advances made by National Australia Bank but their relevance to which entity was not stated.  Mr Winsor deposed to an array of transactions involving MM Pty Ltd’s acquisition of real property and the subsequent entry into leasehold arrangements concerning that or those properties with TT Company.  Whether TT Company’s liquidation affected those arrangements was not stated.  Whether TT Company actually paid rent in respect of those rentals and, if so, how much was also not stated nor demonstrated. 

22. It seems that TT Company had not paid a large sum in rental due by it to MM Pty Ltd, because Mr Winsor deposed to TT Company owing MM Pty Ltd over $600,000 for rental said to be due under the joint venture agreement.  Mr Winsor stated that “pursuant to the first respondent’s guarantee contained in the JV agreement, the first respondent was indebted to [MM Pty Ltd] for this liability.”

23. Several things must be said about Mr Winsor’s assertions in paragraph 32 of his affidavit.  First, no documentary evidence was adduced to support the contention that the first respondent was liable in the sum stated.  Second, at this interlocutory phase of the case, it is hard to see that the joint venture agreement included a guarantee by which it could be said that the husband was liable for the debt default or miscarriage of another within the contemplation of the law of guarantees.  For that matter, there was no evidence of any such liability.  Third, it was not stated that any demand had been made for payment of over $600,000.

24. Next Mr Winsor deposed to MM Pty Ltd directing the husband to pay Mr Winsor.  Precisely why MM Pty Ltd would instruct an alleged debtor to pay a director of the creditor was not stated.  It seemed to make very little sense.  The sum was large – over $600,000.  The payment to Mr Winsor seemed to represent a windfall gain to him.  Mr Winsor stated that he did not operate an account at the time, so MM Pty Ltd told the husband to pay the sum of $200,000 to Ms E.  Mr Winsor asserted that when the payment of $200,000 was taken into account, the husband still remained indebted to MM Pty Ltd in an amount in excess of $400,000 as at the date of the husband’s bankruptcy.

25. During debate before me, I was told that the trustee-in-bankruptcy is not funded to enable him to pursue remedies available to the trustee. 

26. Mr Winsor exhibited a single sheet from the 2019 trading account of MM Pty Ltd showing an entry of $200,000 described as “bad debt recovered”.  Precisely what fact that entry was intended to demonstrate was none too easy to divine.  Why the sum of $200,000 was a bad debt at all in circumstances where the sum was paid as directed seemed to be inconsistent propositions.

27. On behalf of Ms E Mr Horsfall of counsel, submitted that the ultimate recipient of the $200,000 was MM Pty Ltd, relying on paragraphs 17, 18 and 19 of Ms E’s affidavit.  Mr Horsfall submitted he was unable to see how Mr Vadarlis could construe the joint venture agreement as a sham.  Mr Horsfall submitted that the joint venture was entered into, contracts were entered into, leases were entered into and guarantees were given.  I confessed to being presently unable to embrace those submissions with the enthusiasm they were made.  No guarantees were put in evidence.  The so-called joint venture agreement suffers from a litany of formal deficiencies and issues of construction that will need explanation at trial.  The evidence of the so-called direction to pay MM Pty Ltd raised a large number of unanswered questions. 

28. To my way of thinking, at this interlocutory stage doubt exists that the joint venture agreement is as Ms E and Mr Winsor assert it to be, namely, that it is regular, valid and subsisting, made between arms-length commercial entities and that under it an indebtedness of more than $600,000 had arisen by January 2019 requiring the husband to pay MM Pty Ltd.  Conversely, the admitted fact is that the husband paid, and Ms E received, $200,000 in four transfers of $50,000 in January 2019.  Instead of paying MM Pty Ltd, a direction was somehow given, by whom it was not said, requiring the husband to pay $200,000 to the wife of the husband’s accountant, which the husband did.  Thereafter, Ms E said she did as she was directed and paid the same sum to MM Pty Ltd yet she produced no documentary verification to support her statement that she transferred the $200,000 to MM Pty Ltd.

29. Mr Vadarlis argued that Ms E still had the sum of $200,000 in her possession.  To my mind, that contention is certainly arguable.  The wife seeks relief against Ms E in respect of the $200,000.  Valid reasons exist for permitting the wife to seek the joinder of Ms E and to seek orders against her.

30. So far as Aon[5] considerations were concerned, I raised Aon, yet none of the respondents pressed with any force their resistance of the joinder application by reference to principles adumbrated in Aon.  While the delay was explained by oversight, I am not persuaded that irremediable harm is occasioned to Ms E by her joinder now, even recognising the proximity of the trial date.  She has already filed her affidavits in relation to her version of events concerning the sum of $200,000.  If she wishes to adduce further evidence, she has ample time to do so.  While she will need to be served with the whole of the material in existence thus far, a great deal of that will not involve her.  She is unlikely to face an insuperable burden in getting up to speed ahead of trial. 

    [5] Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175.

31. The wife must consider whether pleadings need amending.

32. Leave is granted to the wife to join Ms E as a respondent to this proceeding in the form of the wife’s second further amended initiating application.

33. The wife must file and serve on all parties by noon on 7 July 2023 the second further initiating application.

34. By noon on 7 July 2023, the wife must serve on Ms E the second further amended initiating application, together with a copy of all other documents filed to date, unless the solicitors for Ms E inform the wife’s solicitors that service of such additional documentary material is not required.

1. By noon on 7 July 2023, the wife must file and serve her further amended statement of claim.

2. All respondents must file and serve their responses to the wife’s second further amended initiating application and her further amended statement of claim by noon on 7 August 2023.

3. Ms E must give disclosure of all documents referable to the sum of $200,000 by 4:00pm on 28 July 2023.

4. I adjourn the further hearing of this proceeding for mention at 10:00am on 1 September 2023.

5. Costs of this application are reserved.

I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the ex tempore reasons for judgment of the Honourable Justice Wilson.

Associate:

Dated:       30 June 2023

SCHEDULE OF PARTIES

MLC 7368 of 2020
Respondents
Fourth Respondent:	WARIN PTY LTD
Fifth Respondent:	BB NOMINEES PTY LTD
Sixth Respondent:	MR CC
Prospective Respondent:	MS E