Y Pty Ltd & Anor and Cho & Anor

[2010] FamCA 113

FAMILY COURT OF AUSTRALIA

Y PTY LTD AND ANOR & CHO AND ANOR [2010] FamCA 113

FAMILY LAW – APPLICATION FOR REVIEW – Rights of interveners – Where consent orders have been made between the parties – Whether the Family Law Rules give interveners rights at law or ensure procedural fairness is done

APPLICANT: Y Pty Ltd

APPLICANT: X Pty Ltd

RESPONDENT: Mr Cho

RESPONDENT: Ms Shing

FILE NUMBER: SYC 1141 of 2009

DATE DELIVERED: 1 February 2010

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Cohen J

HEARING DATE: 1 February 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Beaumont

SOLICITOR FOR THE APPLICANT: Minter Ellison

RESPONDENTS: In Person

Orders

1. That paragraph 1(a) of the applicants’ Amended Application in a Case filed

   
   

   27 October 2009 seeking a declaration that the consent orders of the respondents made 10 July 2010 do not bind the applicants is refused.

2. That all parties file such affidavits as they wish to rely upon in determining the issues in these proceedings within six (6) weeks of today and further that within the same time the wife and the applicants each file memorandum of the precise orders they individually seek.

3. That leave is granted to the applicants to subpoena:-

   a)Mr Cho;

   b)Ms Shing;

   c)Ms Shing’s mother;

   d)The husband’s file from the trustee in the husband’s bankruptcy; and

   e)The husband’s mortgage file from H Solicitors,

   limited to documents relating to the creation of the purported agreement dated 2 September 2001 and any documents related to the giving of notice of the applicants as to the existence of that agreement.

4. That the subpoenas referred to in Order 3. are to be made returnable before a deputy registrar at a convenient date after four (4) weeks have elapsed from this day.

5. That in the event that the applicants seek to issue further subpoena they should forward those forms directly to the associate to Justice Cohen for the purpose of His Honour perusing the draft subpoenas and considering a grant of leave to issue them if appropriate.

6. That Ms Shing is granted leave to issue a subpoena to Ms S of Y Pty Limited which is to be made returnable on the first day of the hearing.

7. That leave is granted to applicant’s solicitor to inspect any Family Court of Australia file in which Ms Shing born … 1966 is a party.

8. That the costs of today’s application is stood over to the judge who ultimately determines these proceedings.

9. That this matter is fixed for mention before the Hon. Justice Cohen at 10am
   13 April 2010.

10. That in addition usual service procedures, service of any further material is to include documents to be sent by email to the applicants’ solicitor’s email address care of ….

IT IS NOTED that publication of this judgment under the pseudonym Y Pty Ltd and Anor & Cho and Anor is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 1141 of 2009

Y PTY LTD AND X PTY LTD

Applicant

And

MR CHO

Respondent

MS SHING

Respondent

REASONS FOR JUDGMENT

1. This is to me an unusual case but one of substantial significance.  It deals with problems that this court seems to have successfully avoided directly confronting during its whole existence.  Before me is an application by Y Pty Ltd and a related company called X Pty Ltd.  What they seek in their amended application is, firstly, leave to intervene in proceedings for the purposes of seeking a declaration that is also sought in that application. In the event that the declaration is refused, they seek to review consent orders which were made in proceedings between the husband and wife by a deputy registrar on 10 July 2009.

2. Although the application that I have just referred to was filed on 27 October 2009, an original application was filed on behalf of the applicants on 5 August 2009.  That was filed within a month of 10 July and therefore is within time for seeking a review.  It seeks a review of the consent orders made by the deputy registrar on 10 July 2009.  Because it seeks a review and, in my view, because Y Pty Ltd and X Pty Ltd are affected by the consent orders made on 10 July,  the mere filing of their application on 5 August 2009 is sufficient to make them a party to the proceedings and give them a right to seek that review.

3. The consent orders were made in circumstances which I should refer to.  In 1986, the husband and wife commenced to live together.  In 1992 they were married.  In 1994, they purchased a home at C in the sole name of the husband.  However, the wife asserts and the husband does not dispute that the wife provided part of the deposit and made some of the mortgage payments.  There is, in evidence before me, a document dated 2 September 2001.  It purports to be an agreement to settle the parties’ property as between themselves.  It purports to give 50 per cent equity in the C home to the wife thereby, if it achieves what it purports to, giving the wife a 50 per cent interest in Equity in the home.  In a very strange part of this agreement, it also purports to give the parties the right to jointly occupy the C property. It further purports to require the husband to sell the property and to give the wife 50 per cent of the net proceeds of sale, that is, the proceeds after the first mortgage is paid out,  the first mortgagee being the ANZ Bank. 

4. On 10 February 2003 the husband executed a mortgage over the same property to Y Pty Ltd and X Pty Ltd.  This, it is claimed by both of those companies, gives them the right to the balance of the proceeds of sale in preference to the wife; that is, the balance after the first mortgage is paid.  However, the husband claims that on 7 February 2003 he advised an agent of Y Pty Ltd and therefore the companies with whom he was dealing in relation to the mortgage that the wife had a claim pursuant to the settlement agreement which is said to have been executed on 2 September 2001.

5. If the husband did tell somebody employed by Y Pty Ltd for the purpose of giving Y Pty Ltd notice on 7 February, this may well improve the wife’s chances of asserting that the agreement of 2 September 2001 is genuine and that it gives her some rights over the C property.  There may be reason to believe that it is not genuine.  Whether or not it is genuine, the agreement of 2 September might have other faults which mean that it cannot have given the wife an equitable interest in the C property, but that remains to be seen.  There are other arguments available to Y Pty Ltd and X Pty Ltd which may allow them to assert priority over the wife’s interest in any event, but whether they will succeed I am not in a position to say. 

6. On 10 February 2003, not 2009 as Mr P says in his affidavit, the husband guaranteed by deed the debts of a company in which he had an interest or was associated with called G Company to Y Pty Ltd and X Pty Ltd.  In early 2009 Y Pty Ltd and X Pty Ltd obtained a judgment for about $1.2 million and an order for possession of the C property in proceedings against the husband alone.  However, on 29 September, before the second mortgagee obtained possession, the ANZ Bank entered possession, and is proceeding to sell the property or has already sold it.

7. The ANZ Bank has agreed to hold the proceeds of sale, after it has paid the debt to it itself out, pending the outcome of the proceedings in this court, the husband having become bankrupt on his own petition on 24 March 2009. On 16 April 2009, the husband served a notice pursuant to rule 14.07 of the Family Law Rules on both companies which are the applicants today. That notice was to the effect that the husband and wife were seeking to have the Court make consent orders pursuant to s79 of the Family Law Act which might affect the rights of the two companies, and that if the companies wished they could become parties to the proceedings. Although the notice said a copy of the orders sought was annexed, no such copy was annexed.  The solicitors for the two companies have made much of this, but what was annexed was a copy of an application that was filed by the parties jointly with the Court. It makes it perfectly clear that one of the things that would be sought was orders granting the wife 50 per cent of the net proceeds of sale of the C home after the first mortgage was paid.

8. That is contained in paragraphs 41, 42 and 43 as well as 47, 48 and 49 of the application, as well as paragraph 14.  If not 50 per cent of the net proceeds of sale, the orders were clearly intended to provide the wife with 50 per cent ownership at law of the property, as would be easily discernible by any lawyer reading the document.  The document is annexed to the notice pursuant to rule 14.07 and is entitled Application for Consent Orders.  It bears a stamp that it was filed on 3 March 2009 on behalf of both the husband and the wife.  If the document did not give the companies notice of a direct nature of the orders being sought, it certainly gave them constructive notice.  In response to that notice, the companies’ solicitor wrote a letter on 17 April.  In that letter, they failed to take advantage of the notice they were given to seek a copy of the actual application if they felt a need to have it.

9. What they said is, in effect: We don’t have to take any notice of your notice under rule 14.07 because the Rules say something inconsistent with that, namely, in rule 6.02, which requires that if a person seeks an order which will affect the proprietorial rights of another who is not a party to proceedings in the Family Court, the person seeking the order should join the non-party and make them a party.  The companies’ solicitor’s letter was designed to give them some forensic advantage, rather than to achieve the real intent of the Rules which is to ensure that proceedings in this court are dealt with efficiently and as cheaply as possible and that orders are made in circumstances where justice if afforded to all. 

10. The Rules in relation to service do not actually give rights at law as people seem to wish to claim they do. What the rules do is provide a set of obligations to ensure that justice is done.  The proper response of the company’s solicitors, in the event that the husband and/or wife chose not to join them in circumstances where they should have been joined, should have been to file a notice of appearance and thereby become a party.  They failed to do this. They had some basis for what they did, but nevertheless should not have taken the course they took. 

11. On 2 June Deputy Registrar Campbell sent a letter to the solicitor for both companies informing them that he had refused to make the orders the husband and wife had sought because of their failure to join the two companies who appeared to have an interest.  He informed the husband and wife in this letter that, because the original letter was directed at the husband and wife, they should join persons affected by the consent orders they sought. By sending the letter to the company he also made it clear that the companies had the opportunity to become joined as a result of their own motion.

12. On 10 July the companies received a letter dated 6 July which included a copy of the draft orders. That letter was posted by registered post on 9 July.  However, also on 10 July, the Registrar made the consent orders that the husband and wife sought.  In the circumstances that the Registrar had inferred in his letter of 2 June 2009, a copy of which was sent to the companies, that he would not make the orders unless they were joined, he should not have made those orders without having given the companies the clear notice that he would make them unless they sought to be joined by their own action.

13. On 13 July the two companies’ solicitors wrote to the Registrar again saying that rule 6.02 applies, and the husband and wife should join them. By then it was too late.  The orders had been made.  However, as I have said, on 4 August, within time, the two companies sought to review the Deputy Registrar’s orders.  In my view, those orders remain in force until the review is determined. 

14. This raises an important issue, it being whether the rules give people rights or simply give them opportunities which ensure procedural fairness. I am of the view that rules of court do not give people any rights whatsoever. If they purport to do so, one must ask how there can be a rule which permits the Court to ignore the rules.  In view of the fact that it is undoubted that there should be such an order, because fairness cannot always be achieved by strict compliance with rules, that rules of court do not give people rights in litigation.  They simply give them opportunities. 

15. However, what the two companies now seek, primarily, is leave to intervene. 

16. In my view, as I have said, they do not need leave.  They have intervened.  They have intervened by their application for review filed on 4 August.  The second thing they really seek is a declaration that the consent orders which were made on 10 July do not bind them, and further, that those orders do not derogate from or affect the validity of the second registered mortgage over the C property, or their priority over the wife in access to the proceeds of sale subject to the first mortgage.

17. This declaration should not be made at this stage.  Unless the consent orders are set aside, there will be conflict between the effect of those orders and the mortgage.  The orders of the Court, as they currently stand, require the husband, firstly, to transfer 50 per cent of his interest in the property to the wife or to make the wife a 50 per cent owner of the property, or they entitle the wife as against the husband to 50 per cent of the proceeds of sale after discharge of the first mortgage.  This is quite contrary to the effect of the second mortgage.  The court cannot leave the situation as it stands.  Having made orders, it cannot ignore them in making some other declaration.

18. The proper course is for the Court, in view of the review, to revisit the facts and determine where the wife’s rights lie as against the rights of the two companies.  There is no rule which I know of that would deny an equitable owner her entitlements provided she has not done anything to undermine them in relation to the rights of the two companies just because the husband has defrauded the two companies, if he has done so, by failing to give proper notice, if he has so failed to those companies.  Certainly, bankruptcy does not affect the rights of equitable owners, so the husband’s bankruptcy is irrelevant in relation to the wife’s entitlements.

19. The proper course for me to take is to refuse the declaration and to list the matter for hearing after the parties have had the opportunity to comply with directions which will allow the merits of the matter to be properly heard;  that is, the merits of the wife’s claim as against the claim of the two companies.  The claims would largely be based on the facts and the Court should give both sides the opportunity to assert the facts that they rely upon and test the other’s assertions.  In those circumstances, I shall make such orders.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cohen

Associate:     

Date:              23 February 2010