Watson and Pace and Anor

[2016] FamCA 1004

FAMILY COURT OF AUSTRALIA

WATSON & PACE AND ANOR [2016] FamCA 1004

FAMILY LAW – PRACTICE AND PROCEDURE – Joinder of Parties – Accrued jurisdiction.

Family Law Act 1975 - s 90SM

Fencott v Muller (1983) 152 CLR 570
In Marriage of Warby (2001) 28 Fam LR 443

APPLICANT: Ms Watson

RESPONDENT: Mr Pace

SECOND RESPONDENT: Mr A Pace

FILE NUMBER: CAC 1772 of 2015

DATE DELIVERED: 18 November 2016

PLACE DELIVERED: Canberra

PLACE HEARD: Canberra

JUDGMENT OF: Gill J

HEARING DATE: 18 November 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr G Howard

SOLICITOR FOR THE APPLICANT: Infinity Legal

SOLICITOR FOR THE RESPONDENT: Ms N Murray, Central Coast Family Law

SOLICITOR FOR THE SECOND RESPONDENT: Mr P Robinson, Williamson Isabella Lawyers

Orders

1. That Mr A Pace is joined to the Family Court proceedings as the second respondent.

2. The Court will exercise its accrued jurisdiction in the determination of the interests of the parties in the properties at B Street and C Street and as to any loans and the terms thereof in relation to those properties.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Watson & Pace & Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

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 r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT CANBERRA

FILE NUMBER: CAC 1772 of 2015

Ms Watson

Applicant

And

Mr Pace

Respondent

And

Mr A Pace
Second Respondent

REASONS FOR JUDGMENT

1. The proceedings commenced by Initiating Application filed on 11 November 2015.  Ms Watson sought interim orders that included a restraint in relation to C Street, Suburb D and B Street, Suburb D and final orders seeking a transfer of C Street, Suburb D and other orders. 

2. By Response filed on 29 February 2016 Mr Pace sought interim orders which involved dealing with a caveat that the applicant had placed on B Street, the sale of B Street and the restraint of the proceeds of that sale.  He also sought final orders which involve the sale of C Street, that out of that proceeds would be paid in relation to a debt owed to Mr A Pace and the balance would be distributed 50/50 between he and the applicant. 

3. Orders were made by consent on 2 March 2016 in relation to the sale of B Street which was sold in about August 2016.  There was a restraint in relation to the proceeds.  In the meantime two claims were lodged with the District Court of New South Wales, one against the respondent in relation to B Street, being a proceeding commenced by Mr A Pace.  The other proceedings commenced by Mr A Pace against both the applicant and the respondent regarding C Street. 

4. Those proceedings variously sought the repayments of debts of $70,000 plus interest in relation to B Street and $100,000 regarding C Street. 

5. Orders were made in the Federal Circuit Court for transfer of the proceedings to the Family Court of Australia on 2 August 2016.  Making those orders left outstanding an application made to join Mr A Pace to the proceedings.  Default judgment in the District Court in relation to the B Street proceedings was entered into on 7 September 2016 in relation to a debt in the approximate order of $300,000 to Mr A Pace.  I was advised of this when the matter came before me on 9 September 2016.  At that stage Ms Watson appeared, Mr Pace appeared and Mr A Pace appeared although he resisted joinder to the proceedings. 

6. The factual matters that were in play at that point involved a de facto relationship that had commenced in the early 1980s with a date of separation agreed as 7 February 2014.  It was common that the applicant and respondent had lived together at C Street.  The respondent’s affidavit of 20 February 2016 at paragraph 24 described that during the relationship the applicant and the respondent had acquired B Street, referred to as “the yard’ and C Street, referred to as “the house”. 

7. In 1987 the respondent says that there was a loan from Mr A Pace for a sum of about $70,000 in relation to the yard.  This was almost the complete purchase price of the yard.  There was no formal loan agreement and no interest was paid. Mr A Pace asserts that $300,000 is owing, with interest.  The applicant agreed that a loan was made from Mr A Pace for the purchase of B Street but asserts that the debt was written off by Mr A Pace at a later stage.

8. The respondent says in 2001 or 2002 Mr A Pace suggested that he would loan money for the purchase of C Street.  A loan of $100,000 was made, and the house was purchased in the joint names of the applicant and the respondent with a registered mortgage to Mr A Pace.  The applicant agrees that Mr A Pace provided money for the purchase, that there was a mortgage, but says that she was told it was a formality.  The registered mortgage to Mr A Pace was lifted in 2012 and the applicant asserts that at that point the purchase price which had been put forward by Mr A Pace was effectively gifted.  She places the lifting of the mortgage in 2013. 

9. There is an application made to both join Mr A Pace and to exercise accrued jurisdiction to determine the interests of the applicant, the respondent and Mr A Pace in relation to the two properties. 

10. Criteria in relation to the exercise of accrued jurisdiction is set out in the Full Court case of In Marriage of Warby (2001) 28 Fam LR 443. At paragraph 90 of that judgment at page 478 a number of criteria are outlined to assist in the determination of whether or not an accrued jurisdiction can and ought to be exercised. The first criteria is to examine what the parties have done and the second, the relationships between or among them. I have done this in relation to setting out the history of the parties.

11. The third is the laws which attach rights or liabilities to their conduct and relationships.  It appears in the case that the various laws outside the operation of the Family Law Act 1975 involve the law of contract and a law relating potentially to constructive trusts but at least to equitable interests generally. The fourth question is whether the claims are part of a single justiciable controversy and in determining that question whether the claims are attached, not severable or disparate. The fifth is whether the claims are non-severable from a matrimonial cause and arise out of a common sub-stratum of facts.

12. The question arises as to what is the matter that attracts Federal jurisdiction? That is a claim between the applicant and the respondent seeking the alteration of property interests pursuant to s 90SM of the Family Law Act 1975.

13. What then is the connection between the various claims of the parties, that is between the s 90SM claim by the applicant and the debt claims by the third party.

14. Examining firstly C Street, legal title is held by the applicant and respondent.  There is the claim of a loan by the third party and the denial of the loan by the applicant.  The determination of the existence of a loan is an essential component of the determination of the case in particular determination of the pool of the property.  At paragraph 93 of In Marriage of Warby it was stated that:

    The Family Court of Australia must ascertain as a first step the property pool of the parties available for distribution.

15. While that might have been supplanted as a first step by more recent High Court authority it still remains an essential component.  It is also essential to establish that it is just and equitable to, or not to, or how to, adjust the interests. 

16. Whether there is a loan or not and the terms of the loan is the product here of the same underlying facts both in relation to the s 90SM case and any debt or equitable interest case. That is, the determination of the existence of the loan is inextricably linked with the facts that determine issues of contribution and ownership of property by the applicant and respondent. The determination of the existence of the loan directly impacts upon the rights of the third party.

17. Turning to B Street, legal title was held by the respondent.  The property was sold.  There is the claim that the loan by a third party and again the denial of loan by the applicant.  The applicant asserts, without as yet defining, that she holds an equitable interest in that property or held an equitable interest before its sale.  Whether or not she so held an equitable interest and the question of whether or not there is a loan or was a loan is essential again to determine what constitutes the pool and further what would constitute a just and equitable adjustment if one is required of interests.  Determining whether or not there is a loan and what rights exist in that property is a product of consideration of many of the same factors that are required to determine the existence of the debt in other proceedings or the existence of property interests in these proceedings.  A determination of those questions, in particular whether or not there was a loan and the extent of equitable interests held by the applicant directly impact upon the third party. 

18. In Fencott v Muller (1983) 152 CLR 608 the majority stated

    A judicial power which is not exercised to determine the whole of a controversy is, generally speaking, not appropriately and conveniently exercised.

    Not appropriately, because the controversy is not quelled; not conveniently, because the parties - the principal beneficiaries of the exercise of judicial power - must litigate anew to have the outstanding questions and issues determined.

19. In this matter I find that the claims of Mr A Pace and the claims of the applicant and respondent are part of a single justiciable controversy where the facts constitute common sub-strata. 

20. I further find that a determination of the issues between the parties will impact upon the rights of Mr A Pace. 

21. Accordingly, I find that it is appropriate for this Court to exercise its accrued jurisdiction in respect of the determination of the loans of Mr A Pace and the various equitable rights that are asserted by the applicant and that he is a necessary party to the proceedings, I join him to the proceedings. 

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Gill delivered on 18 November 2016.

Associate: 

Date:  24 November 2016