Wayne & Dillon & Anor - [2008] FamCAFC 204

FAMILY COURT OF AUSTRALIA

WAYNE & DILLON & DILLON

[2008] FamCAFC 204

FAMILY LAW - APPEAL – Leave to appeal – From decision of Federal Magistrate – PROPERTY SETTLEMENT – PRACTICE & PROCEDURE – Joinder – Wife commenced proceedings in Federal Magistrates Court seeking orders by way of alteration of property interests – Wife alleged a third party had commenced a financial interrelationship with the husband and she sought to join her to the property settlement proceedings as a second respondent and that she be restrained from dealing with certain real property – Reasons were delivered for refusing the wife’s application – A few months later the wife brought a further application for joinder of the third party which was heard by a different Federal Magistrate – Federal Magistrate granted leave to wife to join the third party to the proceedings – Third party sought leave to appeal the orders for joinder – The central contention is that the wife had not made out any properly particularised claim, recognisable at law, against the third party – Argued that there was no new, or no sufficient new evidence, upon which the Federal Magistrate could revisit the question of joinder – Argued that issues about disclosure, whether by the husband or the third party, was not a justification for the joinder – Argued that the joinder of the third party to the proceedings was oppressive – Leave to appeal granted – Appeal allowed – Application for amendment to join third party dismissed

Family Law Act 1975 (Cth), s 106B
Family Law Rules 2004, r 6.02
Federal Magistrates Court Rules 2001, r 11.01, r 11.01(1), r 11.02, r 11.02(3)

B Pty Ltd and Ors & K and Anor [2008] FamCAFC 113
Butler-Andrews & Andrews and Ors [2007] FamCA 673
Gitane & Velacruz (2007) FLC 93-309
Gould v Gould; Swire Investments Ltd (1993) FLC 92-434
In the Marriage of Bishop (2003) 30 Fam LR 108
Rutherford and Rutherford (1991) FLC 92-255
The State of Queensland and Anor v J L Holdings Pty Ltd (1997) 189 CLR 146

APPELLANT:

MS WAYNE

FIRST RESPONDENT:

MS DILLON

SECOND RESPONDENT:

MR DILLON

FILE NUMBER:

BRC

2537

2007

APPEAL NUMBER:

2008

DATE DELIVERED:

17 December 2008

PLACE DELIVERED:

Brisbane

PLACE HEARD:

Brisbane

JUDGMENT OF:

Warnick J

HEARING DATE:

10 December 2008

LOWER COURT JURISDICTION:

Federal Magistrates Court

LOWER COURT JUDGMENT DATE:

25 July 2008

LOWER COURT MNC:

[2008] FMCAfam 883

REPRESENTATION

COUNSEL FOR THE APPELLANT:

Ms N A Martin

SOLICITOR FOR THE APPELLANT:

Berck & Associates

COUNSEL FOR THE FISRT RESPONDENT:

Ms M Howe

SOLICITOR FOR THE FIRST RESPONDENT:

Sempre Vero Lawyers

COUNSEL FOR THE SECOND RESPONDENT:

Mr A B George

SOLICITOR FOR THE SECOND RESPONDENT:

John Paul Mould Solicitors

Orders

That the applicant [MS WAYNE] be granted leave to appeal orders 1 to 3 of the orders of Purdon-Sully FM made on 25 July 2008.
That the appeal be allowed.
That orders 1 to 3 of the order of Purdon-Sully FM made on 25 July 2008 be set aside.
That the application of the wife to further amend her application amended on 13 November 2007 to join as second respondent [MS WAYNE] be dismissed.

IT IS NOTED that publication of this judgment under the pseudonym Wayne & Dillon & Dillon is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE

Appeal Number: NA 76L of 2008
File Number: BRC2537 of 2007

MS WAYNE

Appellant

And

MS DILLON

First Respondent

And

MR DILLON

Second Respondent

REASONS FOR JUDGMENT

Mr and Ms Dillon married in 1964 but separated in early 1998. A couple of years beforehand, Ms Wayne and her partner had moved into the house across the road from that in which the husband and wife lived. The wife alleges that, in around 2001 the husband, who was in the building industry, Ms Wayne and, possibly, her then partner, commenced a financial interrelationship (my attempted neutral term).
In May 2006, the wife commenced proceedings in the Federal Magistrates Court of Australia, seeking orders by way of alteration of property interests.
In August 2007, Federal Magistrate Spelleken delivered reasons for refusing an application by the wife that Ms Wayne be joined as a second respondent to the proceedings for property settlement and that she be restrained from dealing with certain real property.
On 5 December 2007, a further application by the wife to join Ms Wayne came before Federal Magistrate Purdon-Sully. The last submission in respect of the application was not made until 27 June 2008 and about a month later, the learned Magistrate delivered her reasons for orders that she made, granting leave to the wife to join Ms Wayne as a party in the proceedings. Federal Magistrate Purdon-Sully said:
8.I propose to grant the applicant leave to join the respondent as a party in these proceedings and do so for the following reasons which are in summary:
a)    Firstly, the wife’s case is plainly arguable;
b)    Secondly, it is necessary for the respondent to be joined to enable the matter to be finally determined and to provide procedural fairness to the respondent;
c)    Thirdly, the husband’s failure to provide adequate disclosure has also impacted upon the court’s ability to do justice and finally determine this matter; and
d)    Fourthly, the wife has adduced additional evidence not placed before her Honour FM Spelleken.
These reasons are in respect of the application by Ms Wayne for leave to appeal the order of Purdon-Sully FM, giving leave to the wife to join Ms Wayne to the proceedings.
The central contention is that, before the Federal Magistrate, the wife had not made out against Ms Wayne any properly particularised claim, recognisable at law. Other arguments were that there was no new evidence, or at least no sufficient new evidence, beyond that put before Spelleken FM, upon which Purdon-Sully FM could revisit the question of joinder; that issues about “disclosure”, whether by the husband and/or Ms Wayne did not justify a joinder of Ms Wayne; and that the joinder of Ms Wayne to the substantive proceedings was oppressive. The final ground was that the reasons were inadequate.
I deal firstly with the central issue and will then say something of the other arguments.

Had the wife particularised a cause of action against Ms Wayne and, taking her case at its highest, shown a triable issue in that respect?

In her reasons, the learned Magistrate did not pose for herself the question as crafted above and I do not say that she had to expressly do so. However, in my view, in this particular case at some point consideration of a notion equivalent to that crafted was necessary.
The Federal Magistrates Court Rules 2001 provide for the joinder of parties. Rules 11.01 and 11.02 in relevant part, provide:
11.01(1) Subject to any order of the Court, a person whose participation is necessary for the Court to completely and finally determine all matters in dispute in a proceeding must be included as a party in the proceeding.
…
11.02(3) The Court may at any time order a party who has included a person as a party to file and serve on each other party in the proceeding an affidavit setting out the basis on which the person has been included.
…
Notwithstanding reference in submissions to the Federal Magistrate to Rule 11.01, there was no argument before me about the meaning of it.
I do not wish in the circumstances to say more of the rule than is strictly necessary. It seems plain enough that under the rule joinder could be permitted even though no order was sought against a third person. A third person might be affected by an order though not directly the subject of it and/or it might be discernable that findings upon which an order is based bind a third person and so in either instance that third person should be party to the proceedings. However, neither of these situations describes the instant case.
The learned Magistrate did not set out this rule in her reason, but written submissions for the wife referred to it and terms used by Purdon-Sully FM in her reasons (for example, in subparagraphs 8(b) and (c) above) indicate that her Honour had the rule in mind.
In B Pty Ltd and Ors & K and Anor [2008] FamCAFC 113, the Full Court of the Family Court considered an appeal from orders permitting joinder of third parties. As with the Federal Magistrates Court Rules, the Family Law Rules 2004 also provide for joinder. Rule 6.02 is:
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.
In the proceedings leading up to the appeal in B Pty Ltd & K (supra), because the application to amend to join the third parties was made outside the time permitting amendment as of right, leave was required. Before Morgan J, she and the parties treated the application for leave as being “of the nature of one for summary dismissal”.
In B Pty Ltd & K (supra), the Full Court said:
43.In the usual run of applications for alteration of property interests or parenting orders, the fact of marriage or parenthood, accompanied, in respect of the former, by a history of contribution to and acquisition of, property and, in respect of the latter, evidence that relates to any aspect of a child’s interests, is sufficient to make the existence of a “cause of action” apparent. No pleading in the traditional sense is required to identify further facts material to the cause.
44.However, the narrative or descriptive nature of evidence is often unsuited to formulate or particularise a cause of action against a third party. Something resembling a statement of claim will generally be necessary.
45.In Gould v Gould; Swire Investments Ltd (1993) FLC 92-434 Fogarty J (with Nicholson CJ and Finn J agreeing) said (at 80,451):
I conclude, consistently with Buckeridge and Barro, that the correct procedure, where an applicant in proceedings under the Family Law Act seeks relief against a person who is a stranger to the marriage or relationship, is to name that person as an additional respondent in the proceeding and set out the nature of the claim and the basis of it in the ordinary way in the application. (emphasis added)
46.Of relevance to the procedure adopted in the instant case, Fogarty J had also earlier said (at 80,448):
…good case management and fairness to the parties, in particular to a third party, suggest that in appropriate circumstances the claim against a third party, or more particularly the jurisdictional base of that claim, be determined as a preliminary issue where it is appropriate and practical to do so. …
47.Morgan J had before her no statement of claim or equivalent; only the orders which the wife wished to add and an affidavit of the wife, in which the wife said: …
…
49.In her reasons for the orders permitting amendment, Morgan J did not address the nature of the wife’s deposition, nor attempt to identify the material facts in support of the claim which the wife sought to add. It is at least unusual in respect of an application said to be of the nature of one for summary dismissal that attention is not given to the identification of facts material to the cause of action.
As seen, rule 11.02(3) of the Federal Magistrates Court Rules, permits the court to require a party to set out in an affidavit “the basis on which the person has been included”. It might be argued that in light of Rule 11.02(3), that when application is made to join a third party, no requirement for a statement of claim should be imposed. However, whether or not that is so, the rule that had particular application to the application before Purdon-Sully FM was Rule 11.01(1).
As seen, while neither that rule nor the relevant Family Law Rule refers to an applicant for leave to join having to establish a cause of action and supporting “case” which, taken at its highest, is arguable, that test was adopted by the parties before Morgan J and by her Honour. That approach was not attacked in the appeal in B Pty Ltd & K (supra). It is a test consistent with the references, in the passages quoted above from B Pty Ltd & K (supra), to the need for an applicant for joinder to set out the nature of the claim and the basis of it. As also seen, in Gould v Gould; Swire Investments Ltd (1993) FLC 92-434, Fogarty J particularly referred to the need for fairness to the third party. Any person joined to a proceeding ought, at that point, be able to take advice on whether the facts pleaded (if established) would lead to a successful claim. Joinder to litigation is a serious step with often significant financial consequences.
The word “necessary” in rule 11.01(1) must mean something more than “useful” or “expeditious”. In my view, if there are available alternative means to joinder to the substantive proceedings, of obtaining from a third person or someone already a party what is needed to allow an applicant for joinder to establish an identified “case”, joinder is unlikely to be “necessary”.
However, 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”. Thus, in an application such as was before the Federal Magistrate, such a question falls for consideration.
As was the case in B Pty Ltd & K (supra), Purdon-Sully FM did not have before her any statements of claim or like documents. She had but an application (many times amended) by the wife, in which some orders were sought against Ms Wayne, and affidavit material upon which the wife relied. Apart from paragraph 8 earlier set out, the reasoning of the Federal Magistrate for the order for joinder was as follows:
9.Whilst I accept that the evidence presented by the wife does not necessarily support some of the conclusions drawn by her in respect of some of the properties deposed to in her material it seems to me that she has an arguable case. Her difficulty in clarifying issues has largely come about as a result of the husband’s conduct in these proceedings and his failure to provide disclosure and comply with court directions. He knows his position. The wife does not. The respondent on her evidence has been in business with the husband and their business dealings have involved matrimonial assets, in some instances, of some value. It may be, even if the court were to accept that they had a personal relationship that their business relationship was an arms length one however that and the involvement of the parties assets in the context of their business relationship will be a matter of evidence, duly tested.
10.I have considered the affidavits of [A Dillon] and [Ms H], evidence not available before her Honour FM Spelleken. I have also taken into account that following Her Honour’s decision I made orders for further disclosure which have not been complied with by the husband. Had the husband complied with those orders then the wife’s enquiries in relation to, for example, the [E] Trust may have been further clarified. In relation to that trust the evidence of the wife is that on 7 November 2003, the husband transferred his half share in a property at [E] to the [E] Trust. [The E property] was a property owned by the husband at the date of separation. The husband was the sole trustee of this trust. The respondent was the nominated primary beneficiary with additional members being entities associated with the respondent or charitable or educational institutions. The purpose of the trust was to make provision for the charitable purposes of the beneficiaries who were entitled to receive income and capital from the trust. Counsel for the wife says that this property was unencumbered when it was sold to a third party for $1,000,000. The wife however says that settlement took place on 6 May 2006 and that she had “heard” (although she does not depose to from where or whom in her affidavit) that there was a mortgage of approximately $200,000 which was paid out at settlement to the husband and his partner, his share then being $400,000. Be that as it may the evidence in respect of this trust, the reason for this transfer, the disbursement of funds and the like is sparse to say the least. The respondent’s evidence raises a number of questions in relation to the enmeshment of matrimonial assets with her and the husband’s business dealings. The respondent admits that she received $400,000 from the husband and she says that it was because he owed her money. However her evidence poses more questions than it answers. So the wife’s case in relation to this property, by way of example, is a clearly arguable one in my view and her case overall is arguable on the evidence before me.
11.The respondent’s participation in these proceedings is necessary for this Court to finally determine the issues before it and the legitimate enquiry sought by the wife by way of disclosure and to ensure that the case can then be disposed of in a timely fashion. In the end it would do an injustice to the parties in the overall determination of this case given the circumstances before me if the respondent was not joined. … [footnotes omitted]
This examination by the learned Magistrate of the wife’s claims was not in specific terms. Indeed, her Honour observed that the evidence presented by the wife did not necessarily support some of the conclusions drawn by her in respect of some of the properties deposed to in her material. Though her Honour then said that it seemed to her that the wife had an arguable case and she referred in some detail to the evidence in respect of the E property transferred to a trust, in what respect the wife’s case was arguable and indeed the “case” itself was not identified. In my view, this, of itself, constitutes appellable error.
In the application of the wife as it stood at the time the matter was before Purdon-Sully FM, these were among the relevant orders sought:
1.That [Ms Wayne] be joined to these proceedings as Second Respondent.
2.(a) it is declared that the Husband and Ms [Wayne] are or have been in a de facto relationship; and
(b)It is declared that Ms [Wayne] holds in trust for the Husband’s share of the net proceeds of sale in the property developments in which he was involved, including, but not limited to [Property V] and [Property E] and other such property as may be deemed by the Court as being held beneficially for the Husband by Ms [Wayne].
Alternatively:
3.It is declared that Ms [Wayne] holds in trust for the Husband, as business partner and friend, the Husband’s share of the net proceeds of sale in the property developments in which he was involved, including, but not limited to [Property V] and [Property E] and other such property as may be deemed by the Court as being held beneficially for the Husband by Ms [Wayne].
Before me, Ms Howe, counsel for the wife, conceded that the request for a declaration of a de facto relationship between the husband and Ms Wayne was really equivalent to a request that a finding in that regard be made, because (the wife hoped) if a de facto relationship was found to exist, it would support the claims of benefits having been conferred on Ms Wayne by the husband in a fashion which gave rise to some equitable interest on his part in the gifted or transferred property. A desire for such a finding is not a basis for joining Ms Wayne as a party.
As to the orders sought in paragraphs 2(b) and 3, in my view these paragraphs do not disclose any cause of action giving rise to some legal or equitable entitlement of the husband in property held by Ms Wayne.

Paragraph 4 is consequential on the preceding paragraphs and paragraph 5 seeks a division of “such monies in order 3”, 55 per cent to the wife.
The application then sought:
Alternatively, or in the event that such payment in Order 3 above is not made within thirty (3) days from the date of these Orders:
6.(a) It is declared that [Ms Wayne] holds the property known as [Property W] in trust in equal shares, or in such shares as this court may determine, for herself and the Husband; and
…
Again, whilst an order is sought against property held by Ms Wayne, no particulars which would enable Ms Wayne to “plead” a defence are provided.
Ms Howe argued that matters deposed to by the wife in her affidavit filed 31 October 2007, in particular paragraphs 22 to 27 inclusive, established the wife’s claims against Ms Wayne. I will not set out those paragraphs here. While they contain facts upon which it might be asserted that some equitable interest arose in the husband in property now held or once held by Ms Wayne, or that some transaction ought be set aside, in my view it is not for Ms Wayne to endeavour to craft from evidentiary material what the cause of action against her might be.
In arguing that what was in the wife’s affidavits was sufficient to support joinder, Ms Howe placed reliance on a statement of the Full Court of the Family Court of Australia in In the Marriage of Bishop (2003) 30 Fam LR 108 (at paragraph 44), in which the Full Court said:
[44]… It appears to us impossible to ascertain the extent of the parties’ assets and liabilities without delving into the issues raised by the wife in her claims against the various parties now to be joined to the litigation.
It will be noted immediately however, that the Full Court referred to “the claims against the various parties”.
The Full Court identified the claim sought by the wife against the third parties in these terms:
[40]… The only relief sought by the wife against the third parties which would appear to be beyond the power of the court to grant an appropriate remedy is the relief sought in respect of the sale of the motor vehicle and its replacement with another.
As I have said, I discern no known “claim” at law identified in this case.
Moreover, among other pertinent statements that the Full Court made in Bishop’s case (supra) was the following:
[33]We think some caution and a very careful examination of the facts needs to be exercised before applying the general notion that if a court has jurisdiction it ought exercise it when dealing with claims involving third parties in family law cases.
Further, a factor in Bishop’s case (supra) which the Full Court thought was among those leading to its conclusion that the third persons in that case ought have been joined, was that those persons did not oppose the joinder.
I do not think that anything said by the Full Court in Bishop’s case (supra), seen in the context of the judgment overall, offers particular support for the wife in the instant case.
In supplementary submissions made for the wife before Purdon-Sully FM, Ms Howe had referred to a decision of Dawe J in Butler-Andrews & Andrews and Ors [2007] FamCA 673. Ms Howe said that her Honour had refused an application for summary dismissal of a case having some similarity to the instant case, in that “matrimonial property has been rolled over”. A telling difference in that case to the instant case is that an application was made to set aside a share sale agreement to which the third persons were parties, pursuant to s 106B of the Family Law Act 1975 (Cth) (“the Act”). This is a recognised basis for relief under the Act. No such application is made in this case at this time.
As something of a fall-back position, Ms Howe referred to what was said in Gitane & Velacruz (2007) FLC 93-309 at paragraph 25, to the effect that if there was a defect in pleadings it would be open to a court to allow a claimant to reframe. However, Ms Howe did not actually seek that leave and certainly did not particularise any amendment proposed.
Because I consider that a combination of the wife’s application and affidavits does not disclose a cause of action or triable claim, I conclude that the learned Magistrate fell into error in permitting the joinder of Ms Wayne.

Other arguments on appeal

The wife had issued a subpoena for production of documents to Ms Wayne. There was some evidence that Ms Wayne had evaded service. Production of documents by Ms Wayne was discussed in the hearing before the Federal Magistrate. Ms Martin of counsel for Ms Wayne indicated that Ms Wayne had filed an affidavit “attaching significant documentation” and did not object to producing relevant documents. However, Ms Martin indicated that the subpoena was “nothing short of simply a fishing expedition” and her client would object to its breadth.
There is nothing to show that the procedure by way of subpoena to Ms Wayne was exhausted or would not produce documents that the wife required to develop a case. Similarly, there is nothing to show that the extensive procedures available against the husband for production of documents, including answers to questions, discovery and disclosure, were exhausted.
In my view, in those circumstances, joinder of Ms Wayne could not be considered “necessary” and insofar as Purdon-Sully FM relied upon difficulties with regard to disclosure to found the joinder, she was in error.
As to the question of whether the material before Purdon-Sully FM was different to that before Spelleken FM, the question loses any real significance, as I have found that even the material that was before Purdon-Sully FM did not amount to the particularisation of maintainable claims against Ms Wayne.
Of itself, the question of oppression and in particular exposure to the costs of litigation, even if recovery against the wife was unlikely, would not, in my view, likely lead to a finding of appealable error. However, the possible existence of such circumstances are part of the reason why something beyond nebulous claims is properly required before joinder is permitted. Those circumstances are also relevant to the question next considered, of whether leave to appeal should be granted, because the order for joinder may well work a substantial injustice.
As to inadequacy of reasons, I regard that ground as substantially subsumed in the successful grounds.

Conclusion

An applicant for leave to appeal must show an error of principle and/or that the decision which it is sought to appeal caused the applicant substantial injustice (see Rutherford and Rutherford (1991) FLC 92-255).
In my view, the learned Magistrate’s approach constituted an error of principle. As just stated, the order for joinder is one with potentially severe financial consequences for Ms Wayne and this constitutes a substantial hardship.
Ms Howe referred to comments by Kirby J in The State of Queensland and Anor v J L Holdings Pty Ltd (1997) 189 CLR 146 (at 370) cautioning against appellate interference with procedural orders. However, his Honour recognised that in a proper case the court would intervene and, in my view, having regard to the impact of the order for joinder and the errors of principle, this is a proper case for intervention.
Leave should be granted and the appeal allowed. The application for amendment to join Ms Wayne should be dismissed.

I certify that the preceding forty-eight (48) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court.

Associate:

Date: 17 December 2008