Woodcock & Woodcock (No 4)
[2023] FedCFamC1F 714
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Woodcock & Woodcock (No 4) [2023] FedCFamC1F 714
File number MLC 13421 of 2020 Judgment of WILSON J Date of judgment 24 August 2023 Catchwords FAMILY LAW – MAJOR COMPLEX FINANCIAL PROCEEDINGS LIST – JOINDER – considerations of rules. Legislation Family Law Act 1975 (Cth) ss 79, 90AE, 90AF and106B
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 56(1) 56(2), 67(1), 67(2), 67(3) and 68(1)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rules 3.03(4) and 3.01
High Court Rules 2004 (Cth) rule 21.05.1
Cases cited Barclay Mowlem Construction Ltd v Dampier Port Authority (2006) 33 WAR 82
Barnes v Addy (1874) LR 9 Ch 244
Byrnes v Kendle (2011) 243 CLR 253
Cao & Trong [2019] FamCA 336
Chickabo Pty Ltd v Zphere Pty Ltd (No 2) [2019] VSC 580
Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (1981) 147 CLR 297
Davy v Garrett (1878) 7 Ch D 473
Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486
Hankinson v De Vries (2013) 50 Fam LR 79
In the Marriage of Whitaker (1980) 5 Fam LR 769
John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1
KTC v David [2022] FCAFC 60
Pigozzo v Mineral Resources Ltd [2022] FCA 1166
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
Re KL Tractors Ltd (1961) 106 CLR 318
Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15
Wayne v Dillon (2008) 40 Fam LR 543
Wilson v Church (1878) 9 Ch D 552
Division Division 1 First Instance Number of paragraphs 64 Date of last submission 7 July 2023 Date of hearing 7 July 2023 Place Melbourne Counsel for the applicant Mr L. Glick KC and Mr M. Wilson Solicitor for the applicant Nedovic Lawyers Counsel for the respondent Mr G. Dickson KC Solicitor for the respondent Lander & Rogers Counsel for the proposed respondents Mr C. Shaw KC, Mr D. Matta and Mr R. Minson Solicitor for the proposed respondents McNab Lawyers ORDERS
MLC 13421 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN MR WOODCOCK
Applicant
AND MS WOODCOCK
Respondent
ORDER MADE BY
WILSON J
DATE OF ORDER
24 AUGUST 2023
THE COURT ORDERS THAT –
1.B Pty Ltd is joined as the second respondent in this proceeding.
2.F Pty Ltd is joined as the third respondent in this proceeding.
3.E Pty Ltd is joined as the fourth respondent in this proceeding.
4.I fix the further hearing of this proceeding to 10:00am on 21 September 2023 for mention in the Major Complex Financial Proceedings List.
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).
REASONS FOR JUDGMENT
WILSON J
INTRODUCTION
On 7 July 2023 the wife’s application for the joinder of four trustees of the trusts in issue in this litigation was debated before me.
The wife contended that pursuant to rule 3.03(4) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“FCFCOA Rules”), she required leave to add as parties –
(a)F Pty Ltd, as trustee for the F Trust;
(b)E Pty Ltd, as trustee for the E Trust;
(c)B Pty Ltd, as trustee for the B Trust; and
(d)C Pty Ltd as trustee for the G Family Trust.
As at the date of the hearing on 7 July 2023, relief under s 106B, under s 90AE or relief under s 90AF had not been sought by the wife against C Pty Ltd, being the trustee of the G Family Trust.
As against the proposed parties other than C Pty Ltd, counsel for the wife submitted that each was a “necessary party” within the contemplation of rule 3.01 of the FCFCOA Rules. That was because each was “a person whose rights may be directly affected by an issue in a proceeding and whose participation as a party is necessary for the court to determine all issues in dispute in the proceeding” and as such each “must be included as a party to the proceeding”. Here, s 106B relief was sought against B Pty Ltd, F Pty Ltd and E Pty Ltd but not against C Pty Ltd.
It was put on behalf of the wife that rule 3.01 of the FCFCOA Rules deals only with a party who must be joined as opposed to a situation where a party may be joined. Counsel for the wife submitted that B Pty Ltd, F Pty Ltd and E Pty Ltd may be directly affected by the orders she seeks under s 106B such that those parties must become parties to this proceeding, praying in aid the High Court’s decision in John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd.[1]
[1] (2010) 241 CLR 1.
The position in relation to the fourth proposed respondent, C Pty Ltd, was somewhat different, according to counsel for the wife. They contended that at the trial of this proceeding, the wife will argue that pursuant to s 90AE and s 90AF of the Family Law Act relief will be sought against each of the four proposed respondents. In written submissions dated 4 May 2023, Mr Glick KC and Mr M. Wilson recorded the following submission in respect of the s 106B relief currently on foot against B Pty Ltd, F Pty Ltd and E Pty Ltd –
The s.106B relief sought by the Wife in her Amended Response is to set aside six identified instruments, being two instruments executed by each of the first three Proposed Respondents. That relief is pertinent to the outcome of these proceedings irrespective of whether the Wife can ultimately prove that the Husband’s interests in each of the first three of the proposed Respondents are items of property that have a value that can be attributed to those interests, or are only financial resources available to the Husband. As but one example, the instruments purport, inter alia, to exclude the Husband from distributions from the trusts whilst he is a party to family law proceedings. Even if those interests are only a financial resource, the level of historical distributions shows how significant they are.
However, as the pleadings presently stand, no current application pursuant to s 90AE or s 90AF of the Family Law Act is made against any of the proposed respondents the wife wishes to join. Her counsel was alive to the position likely adopted by the proposed respondents represented by Mr Shaw KC, namely, that as no relief under s 90AE or s 90AF was sought, it is premature to join the fourth proposed respondent in reliance upon the wording of rule 3.01, namely that its “rights may be directly affected by an issue in the proceeding.”
It seemed that counsel for the wife recognised that C Pty Ltd stood in a separate category than the other proposed respondents against whom s 106B relief is presently sought in respect of six discrete instruments. In written submissions, counsel for the wife advanced the following factual contentions in relation to the G Family Trust, the trustee being C Pty Ltd –
In relation to the [G Family Trust], of the more than $15million distributed to the Husband in the 5 financial years 2016 to 2020 (inclusive), the evidence shows that the Husband has received at least $3,713,000 (if not $149,199 more than that) in distributions from the fourth Proposed Respondent in those five years.5 The Husband is the sole director of the fourth Proposed Respondent. The Wife’s contentions at trial will include the following:
(a)the Husband controls or can control the [G Family Trust] as the sole director of the fourth Proposed Respondent the trustee of that trust;
(b)the value of the Husband’s interests in each of the four proposed Respondents as found at trial, and/or the extent of the financial resources available to the Husband in each of the four proposed Respondents, will be such that relief pursuant to s.90AE and/or s.90AF of the Act will be required to meet the just and equitable requirement of orders altering property in s.79(2) of the Act;
(c)an order pursuant to s.90AE and/or s.90AF of the Act can and should be made against the fourth Proposed Respondent.
The wife, perfectly candidly, conceded that the relief she seeks under s 90AE and s 90AF will be sought at trial but not earlier. The wife’s counsel submitted in writing that any contention that it would be premature to join C Pty Ltd now rather than at some later time runs in a manner contrary to the imperative reposed in s 67(3) of the Federal Circuit and Family Court of Australia Act (“FCFCOA Act”). Relevantly, that section provides as follows –
(3)The family law practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.
Counsel for the wife relied on other statutory provisions. The first was s 67(1) of the FCFCOA Act. It provides as follows –
(1)The overarching purpose of the family law practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
Counsel for the wife submitted that it was antithetical to the intendment of s 67(1) of the FCFCOA Act to delay the joinder of C Pty Ltd until such time as the wife puts on a pleading pursuant to which she specifically invoked s 90AE or s 90AF. Mr Glick KC and Mr Wilson submitted as follows –
Such relief can only be specified at, or immediately prior to, trial and after valuation of all the property of the spouse parties including the Husband’s interests in each of the four proposed Respondents. Delaying the joinder application would require at least another hearing, when there has already been two substantive interlocutory hearings prior to this hearing, as well as numerous mentions and directions hearings.
That contention underscored the wife’s reliance upon the second component of rule 3.01. The first, as has already been addressed, related to the existence of a person whose rights may be directly affected by an issue in a proceeding. The second, conjoined to the first by the word “and”, related to the same party’s participation as a party being necessary for the court to determine all issues in dispute in the proceeding. Counsel for the wife argued that the participation of all of the four proposed additional respondents is necessary to enable the court to determine –
(a)the wife’s claims under s 106B against all proposed additional respondents other than C Pty Ltd; and
(b)the wife’s claims she will advance under s 90AE and 90AF against all proposed additional respondents.
Counsel for the wife argued that unless all of the proposed additional respondents were joined in accordance with her application they will not be bound by the outcome as determined by this court. They put their position in the following terms –
The imperative of the four Proposed Respondents being bound by the outcome of the proceedings is the reason why they should be joined even if, contrary to the Wife’s contention, they are not considered ‘necessary parties’ within the meaning of rule 3.01. The need to ensure that the four Proposed Respondents are bound by the outcome of the proceedings brings this case within the operation of rule 21.05.1(b) and/or (c) of the High Court Rules 2004, and therefore a proper case for leave to be granted pursuant to rule 3.03(4) of the rules.
Aside from rule 3.01, the wife purported to invoke the provisions of rule 21.05.1 of the High Court Rules, incorporated into the FCFCOA Rules by virtue of s 56(1) and (2) of the FCFCOA Act. Those two subsections provide as follows –
56 Practice and procedure
(1)Subject to this Chapter and the Family Law Act 1975, the practice and procedure of the Federal Circuit and Family Court of Australia (Division 1) is to be in accordance with:
(a)regulations made under this Act and the Family Law Act 1975; and
(b)the Rules of Court.
(2)To the extent that the provisions mentioned in subsection (1) are insufficient, the Rules of the High Court apply, mutatis mutandis, so far as they are capable of applying and subject to any directions of the Federal Circuit and Family Court of Australia (Division 1) or a Judge, to the practice and procedure of the Federal Circuit and Family Court of Australia (Division 1).
Rule 21.05.1(c) was of particular relevance. It enabled any person between whom that person and any party to the proceeding there may exist a question arising out of or relating to or connected with any claim in the proceeding which it is just and convenient to determine as between that person and the party as well as between the parties to the proceeding be joined as a party.
In viva voce submissions made on 7 July 2023, Mr Glick KC added to his written submissions in the manner set out hereunder. He contended –
(a)where a party is affected by the outcome of a decision and that party has not consented to being bound by the result, he, she or it can disregard the result and it is irrelevant whether the affected party is aware of the result;
(b)in the decision of Sifris J in Chickabo Pty Ltd v Zphere Pty Ltd (No 2),[2] a question arose whether persons, not being parties to the litigation, were bound by a Barnes v Addy[3] claim, and it was held that they were not bound but should have been made parties to the litigation;
[2] [2019] VSC 580.
[3] (1874) LR 9 Ch 244.
(c)according to the recent decision of the Federal Court of Australia in Pigozzo v Mineral Resources Ltd,[4] Feutrill J made observations about the requirement for courts to not take an unduly technical or restrictive approach to pleadings but rather courts should adopt a robust and non-pedantic approach;
[4] [2022] FCA 1166.
(d)allegation of fraud call for precision and specificity, as was held in Davy v Garrett,[5] and Forrest v Australian Securities and Investments Commission[6] to name a few of the more important authorities on point;
[5] (1878) 7 Ch D 473.
[6] (2012) 247 CLR 486.
(e)a reasonable cause of action is a cause of action that has some chance of success having regard to the allegations pleaded and a reasonable cause of action will not be struck out merely if it appears weak;[7]
[7] KTC v David [2022] FCAFC 60.
(f)the husband has taken no step to strike out the wife’s statement of claim;
(g)the husband in this case is a signatory to the trust deeds amended in September 2020, after the parties had separated, triggering the operation of s 106B of the Family Law Act;
(h)prior to the 2020 amendments being made the husband was a beneficiary enjoying a particular status and a director of three of the four trusts in respect of which, if he did not vote in favour of a resolution, he nevertheless derived, in default, an automatic share of the income so that the husband, by not voting, caused the triggering of the default position, conferring upon him an automatic distribution of around 17%;
(i)of that last proposition Mr Glick KC submitted as follows[8] –
[8] Transcript 7 July 2023, T13 L17-21.
We say that’s a very interesting power, because it triggers the in personam jurisdiction of this court, orders against the husband. If he doesn’t vote, he gets it and if he gets it, it affects the quality, both of the value, the Woodcock value of the chose in action, but secondly, alternatively, it very much enhances the value of the financial resource.
(j)the 2020 amendments were significant because first the husband lost the default power in the sense that if he abstained from voting or voted against the resolution he could no longer distribute the default position and second, he was an excluded person;
(k)despite his status as an excluded person, the husband has been receiving distributions (potentially a breach of trust) which is a matter for the trial of this proceeding;
(l)the husband and the proposed new respondents contend on this application that a s 106B case has not been made out so no purpose exists in joining the trustees;
(m)to that the wife says –
(i)the 2020 amendments detrimentally affected the value of the husband’s equitable rights as property as well as his financial resources;
(ii)where he was once a beneficiary he is now excluded, where he was once an appointer he no longer is and where he was once a guardian, he is personally no longer a guardian;
(iii)that has the consequence that s 106B is enlivened in respect of each trust deed so that each amendment is amenable to orders setting them aside; and
(iv)the corporate trustees are (with the exception of C Pty Ltd) a necessary party.
Mr Glick KC addressed the argument that not all necessary parties are proposed to be joined, especially beneficiaries. Mr Glick submitted that the trustee represents the beneficiaries and that a beneficiary under a discretionary trust has no interest in the trust property.
Mr Glick further submitted that unless an order is made for the joinder of the trustees, they will be free to disregard whatever order is made in this litigation after trial. Mr Glick submitted that the test is whether in the interests of justice the trustees should be joined because their interests would be affected. Mr Glick relied on the observation in the Court of Appeal in the appeal from Sifris J in Chickabo in which it was held by reason of there being no relief sought against the trustees, the plaintiff was required to commence the claim afresh.
Mr Glick submitted that if the wife’s s 106B case were to be advanced without the joinder of the trustees, at the conclusion of the trial the trustees could legitimately contend that the result does not bind them as they were not joined to the s 106B application. Mr Glick went on to submit that if the trustees were not bound by a determination to which they were not party and a subsequent trial became necessary (as it did in Chickabo), complex issues would thereafter arise including which court could have jurisdiction to hear and determine any later trial and whether a risk existed of inconsistent decisions. Mr Glick submitted that the outcome just hypothesised was precisely the disastrous outcome that occurred in John Alexander and in Chickabo. And if it turned out that the order for the joinder of the trustees was wrongly made because the s 106B claim failed, the trustees would have protection by a costs order in their favour.
Mr Glick emphasised how the 2020 instruments have taken effect by reducing and adversely affecting the degree of control and influence the husband has over the decision making process. By reason of the fact that the instruments have taken away the husband’s default power, the value has been reduced and he is now an excluded person.
Mr Glick KC relied on the particulars to the wife’s statement of claim where the wife anticipates why the husband’s interests were adversely affected.
THE POSITION OF THE PARTIES PROPOSED TO BE JOINED
Mr Shaw KC, who appeared with Mr Matta and Mr Minson, relied on written submissions dated 20 October 2022 as well as viva voce submissions argued on 7 July 2023. The following is a recital of the more important propositions advanced by the proposed respondents, taken from their written submissions.
The proposed respondents opposed their joinder on five bases. They were –
(a)the only relief sought by the wife in her statement of claim is an order that various instruments amending the B Trust, the F Trust and the E Trust be set aside on the basis that those amending instruments impaired the husband’s interests in those trusts;
(b)the wife’s statement of claim does not plead material facts which could establish that the impugned instruments have reduced or adversely affected the degree of control or influence the husband has over the decision making processes of the proposed respondents and therefore that the impugned instruments have reduced the value of the husband’s interests in the trusts;
(c)in reliance upon the decision in In the Marriage of Whitaker,[9] the wife’s statement of claim does not plead material facts that could establish that the impugned instruments are “likely” to defeat an anticipated order in this proceeding;
(d)the wife’s statement of claim does not plead material that could establish that the impugned instruments were made by or on behalf of or by direction of or in the interests of the husband as required by s 106B and instead, insufficiently asserts that the impugned instruments are in the husband’s interests; and
(e)it is not a proper purpose to join a party simply to obtain discovery from that party.
[9] (1980) 5 Fam LR 769.
Counsel for the proposed parties to be joined pointed out that the wife raised the issue in her statement of claim concerning the rights of C Pty Ltd, there being no amending instrument in respect of the G Family Trust.
Before developing each specific contention, counsel for the trustees advanced a collection of general propositions. Those may be synthesised in the following manner –
(a)so as to value the husband’s interests in the trusts there is no need for the amending instruments to be invalidated as the valuations can be undertaken on the basis that the amendments were never made;
(b)the word “necessary” in rule 3.01 has been constructed to mean something more than useful or expeditious;[10]
(c)being “necessary” as a party is different to being necessary as a witness;[11]
(d)no final or substantive relief is sought against the proposed respondents and until completion of the valuation of the husband’s disputed interests in the proposed respondents no such relief could properly be brought against the proposed respondents;
(e)the valuation of the husband’s interests in the proposed respondents must be such that without the joinder of the proposed respondents it would be impossible for the court to make the orders sought; and
(f)if the trustees were necessary parties, so too would an array of other parties need to be joined.
[10] Wayne v Dillon (2008) 40 Fam LR 543.
[11] Hankinson v De Vries (2013) 50 Fam LR 79.
In developing their arguments about the second ground of opposition to the proposed joinder, that is to say, the wife’s statement of claim contains no pleading of a reduction of the husband’s control or influence, counsel for the proposed parties argued that the husband was one of five family directors and one of five joint appointors. They argued that the nature and degree of control alleged should be pleaded so that the proposed respondents understand the case being put.
In developing their submissions about the third basis of opposition to the joinder, the proposed respondents argued that the wife’s statement of claim did not plead how the impugned instruments were said to be “likely” to defeat an anticipated order in this proceeding.
In developing their submissions about the fourth basis of opposing the joinder, the proposed respondents argued that the impugned instruments were not made by or on behalf of or at the direction of or in the interests of the husband. They supported that assertion by contending –
(a)the 2020 amending instruments were made as part of a broader modernisation and corporatisation of the trusts affecting a large number of persons and entities, not just the husband;
(b)independent directors were introduced; and
(c)the taker in default provisions were amended in the B Trust to provide, for the first time, for the husband’s family.
Citing the decision in Wilson v Church,[12] counsel for the proposed respondents submitted that joinder merely to obtain discovery from a party is not a proper basis for joinder.
[12] (1878) 9 Ch D 552.
In viva voce submissions advanced by Mr Shaw KC, several other propositions were put forward on behalf of the proposed respondents. Those included the following –
(a)if the evidence is that the diminution in the value of the trusts is minimal, there will be no need to set them aside;
(b)if there is sufficient value in the pool of assets to cover the resolution of this case regardless of the husband’s interests in the trusts, there will be no need to set aside the amending deeds of 2020;
(c)no case has been advanced by the wife about why the amending deeds need to be set aside;
(d)the wife does not allege facts as to how the 2020 instruments are likely to defeat the anticipated order;
(e)in response to the suggestion that unless joined the trustees can ignore any judgment against them, Mr Shaw KC submitted that at present the wife’s application is premature;
(f)in order for there to be utility in the joinder application, a more precise quantification of the monetary amounts involved must be available because only with that information will it be possible to make any order that is just and equitable;
(g)the wife has not availed herself of the opportunity to amend her statement of claim and no valuation evidence has been adduced;
(h)the number of the relevant lineal descendants is now 50;
(i)the wife should have, but has failed to, plead why the impugned instruments made in 2020 are likely to defeat an order under s 79;
(j)counsel for the proposed respondents were unable to put forward authority to support the proposition that a pleader must set forth the basis why the court would set aside the impugned instruments;
(k)a claim to relief under s 106B is a statutory cause of action calling for the party invoking the relief to plead all the elements of the section;
(l)the High Court in Byrnes v Kendle[13] set rules for the construction of trust instruments; and
(m)Rule 3 of the FCFCOA Rules forms a coherent whole such that there is neither need for nor warrant to invoke the Rules of the High Court.
[13] (2011) 243 CLR 253.
With the agreement of all counsel, counsel for the husband addressed last. Mr Dickson KC for the husband prepared written submissions and also addressed verbally on 7 July 2023. In his written submissions, Mr Dickson contended –
(a)no relief has yet been sought by the wife in reliance upon s 90AE or s 90AF;
(b)the fact that relief under those sections may hereafter be sought is no answer to the opposition the husband brings;
(c)only the s 106B claim supports the joinder application;
(d)the s 106B claim enjoys no reasonable prospects of success;
(e)the wife does not have before the court nor does she even seek to join all parties who would be affected by the order; and
(f)without the wife applying to join numerous other parties potentially affected by the s 106B order, the s 106B application has no prospects of success.
In his viva voce submissions, Mr Dickson advanced a collection of other propositions. Those included the following –
(a)no point is to be gained by granting the leave the wife seeks for joinder of the proposed respondents because the wife’s claim cannot succeed;
(b)the wife has not amended her statement of claim;
(c)the wife has not articulated a claim in which she asserts that she needs orders against the trust to procure it disgorging money;
(d)even if the wife were to assert an entitlement to 100% of the pool, the joinder of the trustees would not be required;
(e)it is not utile to order the joinder of some parties (the trustees) when other parties (the beneficiaries) also need to be before the court;
(f)the joinder rules do not go so far as to say that a joinder order should not be made unless the court exhaustively considers the totality of potentially affected persons to ensure that each is incorporated in the litigation; and
(g)on discretionary grounds the court would not grant the joinder unless all parties are before it.
Mr Glick replied. In response to Mr Shaw’s contentions Mr Glick submitted as follows –
(a)the High Court’s decision in Byrnes v Kendle forbids receipt of evidence about intention in relation to a trust;
(b)contrary to the submissions of the trustees, the statutory elements of s 106B have in fact been met;
(c)the quantity of the sum in issue must await expert evidence;
(d)beneficiaries are never joined; and
(e)if a party is erroneously joined, it can be “unjoined”.
CONSIDERATION
The starting point in any analysis of the issues debated on this joinder application is the wife’s statement of claim in order to understand the relief she presently seeks.
Whatever may be said of the criticisms advanced about the adequacy of her statement of claim, which I address below, it seemed to me that the wife has squarely raised a s 106B claim in relation to six instruments by which amendments were purportedly effected to three of the four trusts in issue in this case, the relevant trustees being B Pty Ltd, F Pty Ltd and E Pty Ltd. The relevant paragraphs of the statement of claim are 23 to 27. In the prayer for relief an order is sought against each of B Pty Ltd, F Pty Ltd and E Pty Ltd under s 106B of the Family Law Act. Various specified instruments are identified as the object of relief under s 106B. The order sought is for the setting aside of each such identified instrument.
The trustees and the husband contended that the factual basis for the making of the orders under s 106B have not been adequately articulated in the statement of claim. To that I say the following. First, pleadings are a relatively new phenomenon in this court as they were in what was the Family Court and, in the face of considerable professional opposition following my decision Cao & Trong,[14] pleadings in cases in the Major Complex Financial Proceedings List (“MCFPL”) are now de rigueur and usual. Those pleadings are usually ordered to be to a standard commensurate with a proceeding in the Federal Court of Australia. Principles of pleadings applicable in the Federal Court of Australia have become enshrined in a proceeding in the MCFPL.
[14] [2019] FamCA 336.
As recently as September 2022, Feutrill J of the Federal Court of Australia provided what I regard as a scholarly consideration of applicable legal principles concerning pleadings.[15] His Honour held that a court should take a robust and non-pedantic approach to the determination of complaints about pleadings. Citing Barclay Mowlem Construction Ltd v Dampier Port Authority[16] and Thomson v STX Pan Ocean Co Ltd,[17] Feutrill J held that so long as a pleading identifies the issues and discloses an arguable cause of action or defence that has to be met, the court should be reluctant to allow the time and resources of the parties and the limited resources of the court to be spent excessively debating the application of technical pleadings rules that evolved in and derive from a very different case management environment. That case management environment to which his Honour adverted is recorded, at least in part, in the overarching obligations in s 67 and s 68 of the FCFCOA Act. Those sections instruct that litigation is to be conducted as time efficiently and cost effectively as is achievable. Engaging in arid debate about the adequacy of pleadings, in the context of a pleading that already adequately identifies the issues and discloses an arguable case appraising the parties of the case to be met, is antithetical to attaining the overarching obligations prescribed by the FCFCOA Act. It must not be overlooked that the wife had already provided particulars of the s 106B claim she asserts.
[15] Pigozzo v Mineral Resources Ltd [2022] FCA 1166.
[16] (2006) 33 WAR 82.
[17] [2012] FCAFC 15.
Having regard to the statements of principle in Pigozzo v Mineral Resources Ltd, Barclay Barclay Mowlem Construction Ltd v Dampier Port Authority and Thomson v STX Pan Ocean Co Ltd, it seemed to me that the wife’s statement of claim was adequate in that it identified the issues and disclosed an arguable case. I disagree that the wife was required to or that she failed to disclose material facts by which it could be ascertained that each of the impugned instruments have reduced or adversely affected the degree of control or influence the husband has over the decision making process. I also disagree that the wife was required to or failed to plead material facts by which it could be established that the impugned instruments are “likely” to defeat an anticipated order.
The same observations apply to the other criticisms urged by the trustees about the statement of claim allegedly not disclosing material facts. In my view the wife was not required to record in the statement of claim the facts of which complaint was made by Mr Shaw’s clients.
It is one thing for counsel for the proposed respondents and for the husband to launch a stinging attack on the adequacy of the wife’s statement of claim. But it is an altogether other matter that they failed to take any step to strike out her pleading when such a step so easily could have been taken rather than waiting to complain about the alleged inadequacies of the statement of claim under the rubric of a joinder application. To the contrary – by defence dated 30 September 2022 the husband pleaded to the wife’s statement of claim. In no paragraph of that defence (settled by senior and junior counsel) was any point taken about any paragraph of the statement of claim that the husband was unable to plead to any paragraph because the allegation in the statement of claim lacked material facts. For that matter, prior to filing his defence, had the husband encountered difficulty pleading to the statement of claim he could have but failed to serve a request for particulars or, as one may have expected, he could have applied to strike out the statement of claim and pleaded only when he regarded the statement of claim to be in adequate form. He did neither.
Criticism was also made of the wife’s statement of claim for allegedly failing to plead material facts by which it could be established that the impugned instruments have reduced or adversely affected the degree of control or influence the husband has over the decision making process of the proposed respondents and therefore that the impugned instruments have reduced the value of the husband’s interests in the trusts. I disagree that the wife was required to plead that component of her case with such precision. The valuation process has not even been set in motion. The wife has in fact pleaded what she says is or are the consequences of the amending instruments. She says they should be set aside pursuant to s 106B. I do not accept that the wife is required, in a pleading, to spell out in precise valuation terms (necessarily involving arithmetical computations) the manner in which the amending instruments adversely affected the degree of control the husband has over the decision making process of the proposed respondents. She asserts that the amendments took effect in a particular way. The husband has pleaded to her allegations in that regard. Senior and junior counsel were the authors of that pleading. Self-evidently, the husband was able to formulate his response to the wife’s proposition, whether by denial or otherwise. To my way of thinking, it is abstract in the extreme for the proposed respondents, faced with the husband’s pleadings to the wife’s statement of claim, to assert (wrongly, in my view) that no material facts have been alleged by the wife and so the proposed joinder should be refused. The approach of the proposed respondents exhibits the very conduct Feutrill J held was not to be sanctioned as the modern approach to pleadings. I take the view that the proposed respondents’ approach is pedantic and antithetical to the manner in which pleadings should be approached. The wife’s statement of claim adequately informs the proposed respondents of the case she requires them to meet. She is not required to plead law. She is not required to plead evidence. To the extent that s 106B of the Family Law Act incorporates statutory elements before relief is to be granted under its provisions, the wife is not by pleadings rules required to give the proposed respondents a document akin to written submissions on why the wife asserts that s 106B has been enlivened. She is required to inform the proposed respondents of the issues and she is required to disclose an arguable case of the case the proposed respondents must meet.
I am not in the least bit attracted to pedantic contentions about alleged deficiencies in the wife’s statement of claim.
In debate with Mr Shaw KC, he advanced the propositions that it will be important to ascertain from the evidence whether the value of the trusts is minimal and whether sufficient value in the pool exists to cover the determination of this litigation, irrespective of the husband’s interests in the trusts. Mr Shaw contended that it may be unnecessary to make orders setting aside the amending instruments.
Those contentions seemed to highlight the evidentiary aspects of the contentions the wife makes in her statement of claim. But this aspect of the case will not advance to evidence unless the s 106B case progresses. It will progress against the husband. Yet no utility will be served in making findings on the s 106B component of this litigation including orders setting aside six amending deeds that the wife impugns unless and until the trustees of the relevant trusts are joined and those trustees participate in litigation in which orders directly affecting them are sought.
The proposition Mr Glick KC advanced in reliance upon the observations of the High Court in John Alexander and in reliance upon the trial and Court of Appeal decisions in Chickabo seem to present near insuperable obstacles to the trustees’ opposition to their joinder. Orders binding the trustees can only be made if the observations of principle as expressed in John Alexander are satisfied, one of which is that the trusts need to be joined.
It was said by those opposing the joinder of the trustees that other interests should be joined, including beneficiaries. I do not agree. Beneficiaries do not have standing to sue or be sued. The trustee stands in a representative capacity. It is relevant to observed that no authority was advanced to support the proposition that the beneficiaries must also become parties to this litigation. As the High Court observed in Re KL Tractors Ltd,[18] a not uncommon reason for the absence of authority in respect of some proposition is that consensus has been reached that the proposition cannot be maintained. That is the case with the trustees’ position.
[18] (1961) 106 CLR 318, 338.
Thus far I have considered the criticisms advanced by the husband and by the proposed respondents in respect of the manner in respect of which the wife has pleaded her s 106B claims. I have also considered the propositions that having regard to the observations in John Alexander, unless the trustees are joined the wife is at risk of having any order she seeks against them being ignored by the trustees. It is now necessary to address the elements of rule 3 of the FCFCOA Rules.
Rule 3.01 is in two parts, conjoined by the word ”and”.
In order for a party to be a “necessary party” within the meaning of rule 3.01, that person’s rights “may be directly affected by an issue in a proceeding”. The wife seeks orders setting aside six instruments under three trusts. The trustees of those trusts (B Pty Ltd, E Pty Ltd and F Pty Ltd) are parties whose rights may be directly affected by an issue (the s 106B claim) in the proceeding. To my mind, the first component of rule 3.01 is met in the circumstances of this case in relation to three (but not four) of the trustees.
The second requirement of rule 3.01 for a person to be a necessary party within the meaning of that rule is that the person’s participation as a party is necessary for the court to determine all issues in dispute in the proceeding. Mr Glick KC relied heavily on the observations in John Alexander for the purposes of this second component of rule 3.01.
As has already been recorded, it was said on behalf of the wife that the proposed respondents will not be bound by the outcome determined by the court unless the proposed respondents are joined. To my mind that proposition cannot be gainsaid. The outcome in Chickabo discloses the risk of not joining three of the four trustees.
On behalf of the wife reliance was placed on rule 21.05.1 of the High Court Rules, said to be operative by reason of the silence in rule 3.01 on matters relevant to this joinder application. The husband and the proposed respondents submitted that rule 3.01 was not, on its proper construction, silent on point. I accept that rule 21.05.1 applied in cases where the FCFCOA Rules may be silent in relation to some aspect of procedure. However, it seems to me that rule 3.01 is not silent on the issue with which this application is concerned. In other words, to my mind, rule 3.01 is to be applied, not rule 21.05.1 of the High Court Rules, in the determination of the wife’s joinder application.
To my mind, the elements of rule 3.01 have been demonstrated by the wife in relation to her s 106B case against B Pty Ltd, E Pty Ltd and F Pty Ltd in such manner as to warrant the grant of leave under rule 3.03(4) of the FCFCOA Rules for the joinder of B Pty Ltd, E Pty Ltd and F Pty Ltd as respondents.
THE POSITION WITH C PTY LTD
It will be recalled that relief under s 106B is not sought against C Pty Ltd. Instead, the wife has foreshadowed that relief may be sought against all proposed respondents including C Pty Ltd under s 90AE or s 90AF of the Family Law Act.
No order under either s 90AE or under s 90AF has yet been sought by the wife. She argued that it is not necessary, for the purposes of rule 3.01, that an order is actually presently sought against a party, relying on the observations of Warnick J in Wayne v Dillon.[19] There, the Full Court held that for the purposes of rule 3.01 a person may have rights that are directly affected by an issue in the proceeding yet no order is actually sought against that party. That seems to correspond with a plain reading of rule 3.01, constructed in accordance with conventional orthodoxy in such High Court authorities as Project Blue Sky[20] and Cooper Brookes.[21]
[19] (2008) 40 Fam LR 543 (at [11]).
[20] (1998) 194 CLR 355.
[21] (1981) 147 CLR 297.
In arguendo, counsel for the parties debated whether the anticipated s 90AE or s 90AF contentions of the wife are premature, and if so, whether leave should be granted to join C Pty Ltd having regard to the fact that no application is presently before the court in relation to s 90AE or s 90AF. In her written submissions, the wife advanced the following submissions on point –
In relation to the [G Family Trust], of the more than $15million distributed to the Husband in the 5 financial years 2016 to 2020 (inclusive), the evidence shows that the Husband has received at least $3,713,000 (if not $149,199 more than that) in distributions from the fourth Proposed Respondent in those five years.5 The Husband is the sole director of the fourth Proposed Respondent. The Wife’s contentions at trial will include the following:
(a)the Husband controls or can control the [G Family Trust] as the sole director of the fourth Proposed Respondent the trustee of that trust;
(b)the value of the Husband’s interests in each of the four proposed Respondents as found at trial, and/or the extent of the financial resources available to the Husband in each of the four proposed Respondents, will be such that relief pursuant to s.90AE and/or s.90AF of the Act will be required to meet the just and equitable requirement of orders altering property in s.79(2) of the Act;
(c)an order pursuant to s.90AE and/or s.90AF of the Act can and should be made against the fourth Proposed Respondent.
Mr Glick KC submitted that no merit existed in the contention that the wife’s s 90AE and s 90AF claims were premature having regard to the statutory imperatives reposed in s 67(3) and 67(1) of the FCFCOA Act. Section 67(1) is the overarching purpose provision. It provides as follows –
67 Overarching purpose of family law practice and procedure provisions
(1)The overarching purpose of the family law practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
Section 67(3) regulates the provisions of family law practice and procedure so as to promote the overarching purpose of the FCFCOA. Section 67(3) is in the following terms –
(3)The family law practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.
Mr Glick submitted that consonant with both s 67(1) and s 67(3) of the FCFCOA Act, the wife should be permitted to advance her claim under either (or both) s 90AE and s 90AF and she should be permitted to do so once valuation evidence has been adduced of the husband’s interests in each of the four trusts. Once that valuation evidence has been filed, whether that be at or immediately prior to trial, then the wife should not be shut out from enlivening a claim under s 90AE or s 90AF. To foreclose on her ability to bring such a claim once the valuation evidence is filed of the husband’s interests in the four trusts would be antithetical to the overarching purpose of the FCFCOA Act, so Mr Glick KC submitted.
To my mind, merit lies in both contentions. I accept that for the purposes of rule 3.01 an order need not be sought, in terms, of a particular nature and to that end, it seems to me that the wife is correct in asserting that as against C Pty Ltd, depending on the particulars of the valuation of the husband’s interests in it, she may have a claim against C Pty Ltd that is presently unparticularised.
Equally I recognise that in order to join a party, the court should be persuaded that in real terms, not merely academically, a legislative basis exists pursuant to which a claim is being brought against the party whose joinder is sought. In the Federal Court of Australia, the practice and procedure of which is reflected in the operation of the Major Complex Financial Proceedings List, in a joinder application the party applying for the joinder of another not only sets out the factual basis for the joinder but, ordinarily, also exhibits a proposed statement of claim showing in precise terms the proposed claim so as to enable the court to assess the purpose of the proposed joinder. The rationale behind such an approach is to assess, for example, whether there is utility in the joinder or whether, for example, the cause of action proposed is, say, statute barred.
In adopting something of a wait-and-see approach, I recognise that the prospects of C Pty Ltd being joined as a respondent must await the provision of valuation evidence and that it is likely that the interlocutory phases of this litigation against the husband, B Pty Ltd, E Pty Ltd and F Pty Ltd will progress to an advanced point before C Pty Ltd is joined (if that be the case). I also recognise the force of Mr Glick’s argument that such a course is undesirable because the wife and four respondents will not be in lockstep in the progress of this case to trial if it transpires that C Pty Ltd is ultimately joined. Yet such an outcome is unavoidable. Aside from the prospect of the case getting to trial slower than it would if C Pty Ltd were joined now and a s 90AE or s 90AF claim advanced against it now, there is unlikely to be any major disadvantage to the wife in deferring a consideration of her joinder of C Pty Ltd until some date subsequent to the provision of the valuations of the husband’s interests in the four trusts.
That said, it is undesirable for the valuation of the four trusts to drift. In a month I will hear from the parties to ascertain from them what their programme is for the performance of all tasks associated with obtaining expert evidence for the valuation of the husband’s interests in the four trusts. To that end I fix 21 September 2023 for a mention of this proceeding so that either consent orders may be made in that regard or directions can be debated with a view to orders being made so as to obtains expert evidence in the nature of valuation evidence of the husband’s interests in the B Trust, the F Trust, the E Trust and the G Family trust.
I otherwise make orders for the granting of leave to the wife under rule 3.03(4) for the joinder of B Pty Ltd, F Pty Ltd and E Pty Ltd as, respectively, the second, third and fourth respondents to this proceedings.
I certify that the preceding sixty-four numbered (64) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Wilson. Associate:
Dated: 24 August 2023
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