Yong & Weng
[2024] FedCFamC1F 440
•28 June 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Yong & Weng [2024] FedCFamC1F 440
File number(s): MLC 12940 of 2022 Judgment of: STRUM J Date of judgment: 28 June 2024 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Joinder application – Where the wife seeks to join the husband’s brother and a corporation of which he is the sole director as the proposed second and third respondents – Where the husband made payments to his brother shortly after separation totalling $465,000 – Where the wife alleges that the payments were a disposition within the meaning of s 106B – Where the wife seeks that the payments be set aside and paid to her in specie – Where the wife’s statement of claim seeks relief not the subject of her application filed in the proceeding – Court not a court of pleadings –
Pleadings to be in accordance with the High Court Rules 2004 (Cth) – Purpose of pleadings in this Court considered – Where the respondents argue that there is a substantial net asset pool and that setting aside the payments is unnecessary and they can be added back – Where the respondents seek a summary dismissal of the wife’s s 106B application – Where the respondents do not apply the correct test for a summary dismissal – Where the wife’s s 106B application does not presently have no reasonable likelihood of success – Where it is unnecessary to join the corporation to the proceedings for the relief sought by the wife – Orders for the husband’s brother to be joined to the proceedings – Wife’s statement of claim struck outLegislation: Family Law Act 1975 (Cth) ss 78, 79, 90AE, 106B
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 26, 46, 56, 62
Explanatory Memorandum to the Federal Circuit and Family Court of Australia Bill 2019 (Cth)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 1.05, 2.01, 2.18, 2.21, 3.01, 3.03, 8.14, 10.09
High Court Rules 2004 (Cth) rr 27.02.2, 27.04, 27.09.5
Supreme Court (General Civil Procedure) Rules 2015 (Vic)
Cases cited: A Bank & Coleiro and Anor [2011] FamCAFC 157
AJO & GRO [2005] FamCA 195
Arnold & Arnold [2021] FamCA 226
Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279
B Pty Ltd and Ors & K and Anor (2008) FLC 93-380
Friar & Friar [2011] FamCAFC 71
Galante & Galante and Ors [2019] FamCA 756
Gelley & Gelley (No. 2) (1992) FLC 92-291
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Gould & Gould & Swire Investments Ltd (1993) FLC 92-434
Hankinson & De Vries and Ors [2013] FamCA 455
Jordan & Sutton (No 2) [2022] FedCFamC1F 850
John Alexander’s Clubs Pty Ltd v White City
Tennis Club Ltd (2010) 241 CLR 1
Kayce & Wilda (No 2) [2024] FedCFamC1F 405
Lund & Whittall [2024] FedCFamC1F 271
Pagliotti & Hartner [2009] FamCAFC 18
Pencious & Pencious [2010] FamCA 605
Trawl Industries of Australia Pty Ltd v Effem Food Pty Ltd [1992] FCA 377
Quincey & Quincey [2024] FedCFamC1A 30
Wayne & Dillon and Anor [2008] FamCAFC 204
Division: Division 1 First Instance Number of paragraphs: 90 Date of hearing: 22 February, 13 March 2024 Place: Melbourne Counsel for the Applicant: Mr Stanley Solicitor for the Applicant: Blackwood Family Lawyers Counsel for the Respondent: Mr Thompson Solicitor for the Respondent: Nicholas James Lawyers Counsel for the Prospective Respondents: Mr Werner Solicitor for the Prospective Respondents: Johnston Family Lawyers ORDERS
MLC 12940 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS YONG
Applicant
AND: MR WENG
Respondent
MR B WENG
First Prospective Respondent
C PTY LTD
Second Prospective Respondent
ORDER MADE BY:
STRUM J
DATE OF ORDER:
28 JUNE 2024
THE COURT ORDERS THAT:
1.Mr B Weng be joined to this proceeding as the second respondent.
2.Paragraph 2 of the Application in a Proceeding filed by the wife on 5 September 2023 be dismissed.
3.The Statement of Claim filed by the wife on 13 October 2023 be struck out.
4.Order 1 of the Orders made by a Registrar be discharged.
5.Within 28 days, the wife file and serve points of claim in support of the relief sought by her:
(a)against the second respondent, pursuant to s 106B of the Family Law Act 1975 (Cth), in paragraph 3 of her further amended Initiating Application filed 13 October 2023; and
(b)in relation to the declaratory relief in paragraph 13 thereof.
6.Paragraphs 3, 4, 5 and 6 of the wife’s Application in a Proceeding be adjourned to a Senior Judicial Registrar on a date to be fixed for determination, insofar as the relief sought therein is within their delegated powers, and otherwise for case management and, if necessary, relisting before the Honourable Justice Strum.
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).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of 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 the pseudonym Yong & Weng has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
STRUM J
By Application in a Proceeding, filed 5 September 2023, the wife relevantly, for present purposes, seeks to join Mr B Weng as a second respondent and C Pty Ltd (“C Pty Ltd”) as a third respondent (“joinder application”). The proposed second respondent is the brother of the respondent husband (“brother”) and the sole director and shareholder of C Pty Ltd.
The reasons for the proposed joinder are as follows. First, by her further amended Initiating Application filed 13 October 2023, the wife seeks, inter alia, by way of final relief, that pursuant to s 106B of the Family Law Act 1975 (Cth) (“Act”), post-separation payments totalling $465,000 made by the husband to his brother and/or to C Pty Ltd between 15 August 2022 and 13 September 2022 (“Payments”) be set aside and that those funds be paid to her in specie, together with “[s]uch further funds … as this Honourable Court considers just and equitable”. The wife’s case is that the husband and she separated finally in July 2022, shortly prior to the making of the Payments. Whilst the husband previously deposed that the wife and he separated finally in August or September 2022, in his Case Outline he now agrees that final separation indeed occurred in the month contended by her - on 11 July 2022, to be precise.
At the hearing of the joinder application, the wife sought leave to amend the relief sought by her pursuant to s 106B to seek, first, that the Payments made by the husband to his brother be set aside and, secondly, that “any transaction(s) transferring the Payments by the [brother] to [C Pty Ltd] be set aside” (emphasis added). I refused leave to the wife to amend the relief sought by her to such effect; there is, at present, no evidence, or even allegation, that the Payments have been transferred by the brother to C Pty Ltd. The proposed amended claim against C Pty Ltd, at this stage, is entirely speculative.
By the prayer for relief in a statement of claim filed by the wife, also on 13 October 2023, she seeks further orders, inexplicably not sought in her further amended Initiating Application filed that day, inter alia, that the brother and/or C Pty Ltd hold the payments totalling $465,000 upon constructive trust for her. That relief is not expressed as being sought in the alternative to her s 106B application.
In her Application in a Proceeding, the wife further seeks that the brother pay the sum of $465,000 to her solicitors, being the amount of the Payments, to be held upon trust in an interest earning controlled monies account pending further order or written agreement between the parties.
Secondly, by both her further amended Initiating Application and her statement of claim, the wife seeks a declaration that the husband has an (unspecified) equitable interest in the real property situated at D Street, Suburb E in the State of Victoria (“D Street”), registered in the name of C Pty Ltd which, as I have noted above, is solely owned and controlled by the brother. Whether that declaration is sought pursuant to s 78 of the Act or any accrued jurisdiction of the Court is not specified. Further, by her statement of claim but, critically, not her further amended Initiating Application, the wife also seeks an order pursuant to s 90AE(2)(b) of the Act that the husband’s asserted equitable interest in D Street be “vested” in her.
By his Response to an Application in a Proceeding, filed 15 February 2024, the husband seeks that the wife’s joinder application be dismissed.
By their Response to an Application in a Proceeding, filed 27 September 2023, the brother and C Pty Ltd similarly seek that the joinder application be dismissed and that the wife’s applications against them, for both final and interim relief, be dismissed for want of jurisdiction or summarily dismissed pursuant to r 10.09 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“Rules”). However, by minute of proposed orders, annexed to their Case Outline filed 15 February 2024, they seek that the joinder application be dismissed and that the wife’s substantive applications for interlocutory and final orders against them be dismissed or, alternatively, that her statement of claim be struck out and the joinder application be adjourned. Notwithstanding my observations below, regarding the proper way in which orders should be sought, I am satisfied that the further relief sought by the brother and C Pty Ltd in that minute is inherently intertwined with the joinder application.
The wife relies upon her affidavit filed 4 September 2023. The husband relies primarily upon his affidavit filed 15 February 2024, noting the application of r 8.14 of the Rules. The brother and C Pty Ltd rely upon his affidavit filed 27 September 2023, as well as that of their accountant, Mr F, filed 17 November 2023.
For the reasons that follow, I shall order that the brother, but not C Pty Ltd, be joined as a further respondent to this proceeding but that the wife’s statement of claim be struck out and re-pleaded, in points of claim. to support the relief sought by her pursuant to s 106B of the Act and for declaratory relief in her further amended Initiating Application.
BACKGROUND
The gravamen of the wife’s joinder application is that the Payments made by the husband to his brother constitute a “disposition by … a party, which is made … to defeat an … anticipated order in [these] proceedings” within the meaning of s 106B(1) of the Act. She points to what she asserts, and prima facie appear, to be inconsistent explanations proffered by the husband and his brother for the Payments, including:
·repayments by the husband of a loan (undocumented or documented) alleged to have been made by the brother to him in about 2016 for the start-up costs of their business, G Company, including the fit-out of D Street; or
·repayment by the husband of an alleged shortfall between his half-share of the rent actually paid by him, and market rental, for D Street. In this latter respect, it appears that the rent actually paid was somewhere between $19,800 - $23,160 per annum but it is asserted that market rental that allegedly should have been paid was in the order of $140,000 per annum.
The husband and his brother deny any impropriety in relation to the Payments and oppose joinder of the brother and C Pty Ltd, in summary, on the grounds that:
·In the case of C Pty Ltd, its rights will not be directly affected by the application for declaratory relief, in circumstances where the wife does not seek any consequential relief in her further amended Initiating Application in relation to husband’s alleged equitable interest in D Street.
·In the case of both the brother and C Pty Ltd, their participation as parties is not necessary for the Court to determine all issues in dispute in the proceeding, as required by r 3.01 of the Rules. The propriety or otherwise of the Payments is an issue for trial. However, the husband and his brother contend that the participation of the brother as a party is not necessary as they assert that, even on the wife’s case, there are sufficient assets available for division between the husband and her at trial. In this regard, they rely primarily upon Gelley & Gelley (No. 2) (1992) FLC 92-291.
The husband’s case, as summarised in his Case Outline, and largely consistent with that of his brother, is that, whilst in his affidavit filed on 23 December 2022, he deposed that the Payments were in repayment of monies lent to him by his brother on account of the establishment costs for G Company, which he then believed to be the subject of a verbal agreement between them:
8.The Respondent Husband was informed by the [proposed] 2nd Respondent in around [early] 2023 that they had in fact documented their agreement by way of a written Loan Agreement, executed [in mid] 2015 and witnessed by [Mr H]. The [proposed] 2nd Respondent provided this Agreement to the Respondent Husband [in early] 2023. The Respondent Husband had forgotten about this Loan Agreement, in circumstances whereby it was executed some 8 years ago.
9.Despite initially believing the repayment of $465,000 to the [proposed] 2nd Respondent was on account of the [G Company] establishment costs, the Respondent Husband now understands that this repayment was on account of rent owed to the 3rd Respondent. The Respondent Husband “misunderstood” the nature of his agreement with the 2nd and 3rd Respondents.
10.Prior to the establishment of [G Company], the Respondent Husband advised the 2nd Respondent that he could not afford to pay half the cost of establishing [G Company] (including fit-out and renovation costs) and half of market rent to the 3rd Respondent.
11.The Respondent Husband and the 2nd and 3rd Respondent estimated the commercial rent for the [D Street Property] as a [business with mixed use rooms] and car parking, would be approximately $140,000 per annum.
12.In assisting the Respondent Husband to proceed with the establishment of [G Company], it was privately and verbally agreed the [proposed] 3rd Respondent would initially and outwardly charge the sum of only $20,000 rent per annum to [G Company], with payment of the Respondent Husband’s half‑share of the remaining estimated market rent to be postponed until such time as he could afford to pay same.
13.Following the establishment of [G Company], the [proposed] 2nd and 3rd Respondent afforded the Respondent Husband ongoing credit for his half‑share of the remaining market rent.
14.Following the breakdown of the marriage between the Applicant Wife and the Respondent Husband, the [proposed] 2nd Respondent requested that the loan owed to him by the Respondent Husband be repaid in its entirety.
15.The debt to the [proposed] 2nd and 3rd Respondents was thereafter discharged in full between […] August 2022 and […] September 2022.
The husband, possibly boldly, submits at [26] of his Case Outline that the joinder application is “unmeritorious and without a factual basis” because:
… [t]he Respondent Husband and the proposed further Respondents entered into legitimate commercial arrangements to the effect the Respondent Husband owed moneys to the [proposed] 2nd Respondent pursuant to an agreement. The Court is obliged to respect those commercial arrangements and the written agreement at the hearing of the section 79 proceedings between the Respondent Husband and Applicant Wife.
Whether the alleged arrangements were legitimate and/or commercial matters are triable issues. If they are not found to be so, the Court is not obliged to respect them.
The brother, in his affidavit filed 27 September 2023, confirms that he received the Payments between August 2022 –September 2022. He deposes that, as far as he is concerned, the Payments were owed by the husband to him by reason of “an ongoing credit” that he gave the husband “since 2016 – on the rent payable to me for the use of the [D Street] Property as a [business]”. He further deposes, inter alia, as follows:
16.Outwardly, a below market rent was payable by [G Company] (i.e. $19,800 per annum incl GST). Privately, [the husband] and I agreed that he would pay me his half share of the difference between that amount and a commercial rent when he was able to.
17.[The husband] and I agreed at the start that we wanted to be in [business] together …
18.The problem was that [the husband] could not afford the investment at the time. He told me the cost of his share of the fit-out of the property coupled with his share of the rent to [C Pty Ltd] was simply too much (he had a wife and four children).
19.I already owned the premises and it suited me to assist [the husband] in entering the [business] with me. I was not going to do it without getting paid back.
PRELIMINARY
Relief in this Court is sought by application, response or reply. In the case of final relief, it is sought by Initiating Application, Response to Initiating Application or Reply: rr 2.01(1), 2.01(6), 2.18(1) and 2.21 of the Rules. In the case of interlocutory relief, it is sought by Application in a Proceeding, Response to an Application in a Proceeding or Reply: rr 2.01(4), 2.01(6), 2.18(1) and 2.21 of the Rules.
As to any need for particularisation of a claim against a proposed third party, whilst I acknowledge that “the narrative or descriptive nature of evidence is often unsuited to formulate or particularise a cause of action against a third party”, there is no immutable rule or requirement in this Court that, in every such case, a statement of claim is necessary; rather, “[s]omething resembling a statement of claim will generally be necessary” (emphasis added): B Pty Ltd and Ors & K and Anor (2008) FLC 93-380 at [44].
To avoid confusion, it may be appropriate in this Court, that a document “resembling a statement of claim” be referred to, instead, as points of claim.
In B Pty Ltd and Ors & K and Anor, the Full Court referred with approval to its earlier decision in Gould & Gould & Swire Investments Ltd (1993) FLC 92-434 at 80,451, where Fogarty J (with whom Nicholson CJ and Finn J agreed) said 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 (in addition to naming that person as an additional respondent in the proceeding) to “set out the nature of the claim and the basis of it in the ordinary way in the application” (emphasis added).
This Court is not a court of pleadings. Section 62 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“FCFCOA Act”) provides:
1.Proceedings may be instituted in the Federal Circuit and Family Court of Australia (Division 1) by way of application without the need for pleadings.
2.Subsection (1) has effect subject to the Rules of Court.
Even where pleadings have been ordered and/or filed, proceedings in this Court are determined on applications and responses (and, on occasion, replies) and the evidence in support thereof, not on pleadings.
In Quincey & Quincey [2024] FedCFamC1A 30 at [28], Tree J referred to Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 296–297, where Dawson J said:
It is, of course, the purpose of pleadings to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings upon trial may be conducted in an orderly fashion by reference to those issues. The defined issues provide the basis upon which evidence may be ruled admissible or inadmissible upon the ground of relevance. But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings. It is incumbent upon the trial judge to see that the pleadings or particulars are amended so that the record reflects the proceedings as they have been conducted, but his failure to do so will not result in the invalidity of those proceedings: Dare v Pulham (1982) 148 CLR 658 at 664; Water Board v Moustakas (1988) 62 ALJR 209 at 211; 77 ALR 193 at 197; Leotta v Public Transport Commission (NSW) (1976) 50 ALR 666 at 668; 9 ALR 437 at 446; Maloney v Commissioner for Railways (NSW) (1978) ALJR 292 at 295; 18 ALR 147 at 151.
(Emphasis added by Tree J)
Tree J continued at [29]:
Both before and after that decision, many other cases have stated identical principles, of which Prysmian Cavi E Sistemi SRL v Australian Competition and Consumer Commission [2018] FCAFC 30 at [69]–[73] (adopting Betfair Pty Ltd v Racing New South Wales [2010] FCAFC 133 at [50]–[52]) is but one example. See also Jordan & Sutton (No 2) [2022] FedCFamC1F 850 at [78], per Harper J and Kayce & Wilda (No 2) [2024] FedCFamC1F 405 at [18] – [21].
More recently, in Lund & Whittall [2024] FedCFamC1F 271 at [33], Berman J said:
33This Court does not rely upon or require pleadings. It is permissible to gain an understanding of the nature and extent of the claim and the particulars of the claim from documents properly identified. In this regard, the substantial affidavit material and written submission documents seeks to set out the parameters of the applicant’s claim. It is not for me to determine to finality the orders sought by the applicant against the second respondent unless I am satisfied that they are so lacking in any merit that they would not be able to resist an application for summary dismissal.
Berman J referred at [31] to Trawl Industries of Australia Pty Ltd v Effem Food Pty Ltd [1992] FCA 377; (1992) 108 ALR 335 at 347, where Gummow J said:
However, as indicated above, for the law of Australia it is most suitable to focus upon the substance of the two proceedings as distinct from their form. This reflects the constitutional basis of federal jurisdiction, to which I have referred earlier in these reasons. Also, it allows for the very many controversies which now come before superior courts, federal and State, without pleadings. And even where pleadings are necessary or are ordered, the effect of the Judicature system of pleading, now in general operation in Australia, is as described by Barwick C.J.:
"(T)here is no necessity to assert or identify a legal category of action…It is sufficient in matters in the Federal Court to assert the facts on which the plaintiff or applicant party relies and to nominate the remedies which he seeks as a consequence of the occurrence of those facts."
(Philip Morris Incorporated v Adam P. Brown Male Fashions Proprietary Limited (1981) 148 CLR 457 at 473).
As Berman J observed at [32], that passage was quoted with approval by the Full Court in Pagliotti & Hartner [2009] FamCAFC 18; (2009) 41 Fam LR 41.
In the circumstances, I consider that, especially in this Court, the purpose of pleadings, where ordered and/or filed, is to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings, at trial, may be conducted in an orderly fashion by reference to those issues. However, they are not determinative of proceedings, which are delineated by the orders sought in applications, responses and/or replies, and the evidence adduced in support thereof.
Accordingly, in considering the wife’s joinder application, I shall focus upon the final relief sought in her further amended Initiating Application and not her statement of claim, filed on the same day, notwithstanding that the latter was filed pursuant to orders made by a Judicial Registrar on 15 September 2023. Those orders required that:
1.Within 28 days, the Wife file and serve a statement of claim which complies with the Supreme Court (General Civil Procedure) Rules 2015 (Vic) setting out with full and proper particulars:
a)all the allegations of fact on which she relies to support her claim for relief against each of the proposed Second and Third Respondents
b)the precise relief she seeks against each of the proposed Second and Third Respondents by way of final orders
2.Within 28 days, the Wife file and serve a Further Amended Initiating Application which sets out the precise relief she seeks against each of the proposed Second and Third Respondents by way of final orders.
Whilst infelicitously drafted, in that order 1(b) required the wife to set out, in her Statement of Claim, “the precise relief she seeks against each of the proposed Second and Third Respondents by way of final orders” and order 2 required her to do likewise in a further amended Initiating Application, the former order did not detract from the latter order or the provisions of the Rules referred to above.
Further, it is entirely unclear why, given my observations above, the Judicial Registrar saw fit to require the statement of claim to comply with the Supreme Court (General Civil Procedure) Rules 2015 (Vic). Section 56 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) provides:
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).
…
4.In this section, practice and procedure includes all matters with respect to which regulations under this Act, the Family Law Act 1975 or Rules of Court may be made.
Rules 27.02.2 of the High Court Rules 2004 (Cth) (“High Court Rules”) provides:
So far as practicable every pleading shall set out each allegation in a separate paragraph.
Rule 27.04 of High Court Rules Rules relevantly provides:
…
(b)shall contain in a summary form a statement of all the material facts on which the plaintiff relies, but not the evidence by which those facts are to be proved;
(c)where any claim arises by or under any Act, shall identify the specific provisions relied on; and
(d)shall contain the necessary particulars of any fact or matter pleaded, including:
(i)all particulars necessary to enable the opposite party to plead or to define the questions for trial or to avoid surprise at trial; and
(ii)particulars of any misrepresentation, fraud, breach of trust, wilful default, or like matter; and
(e) shall state specifically the relief or remedy claimed.
Rule 27.09.5 of those Rules provides:
Where a pleading:
a. does not disclose a cause of action or defence;
b. is scandalous, frivolous or vexatious;
c. may prejudice, embarrass or delay the fair trial of the proceedings; or
d. is otherwise an abuse of the process of the Court;
the Court or a Justice may order the whole or part of the pleading be struck out or amended.
For the reasons herein, I consider that, insofar as may be relevant, the wife’s statement of claim does not comply with the above provisions of the High Court Rules in relation to pleadings. However, more importantly, I consider that it does not assist the husband, the proposed other parties and the Court to understand her causes of action, including under ss 106B of the Act and for declaratory releif. It does not achieve the purpose of pleadings, as formulated by Dawson J in Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 296, namely, “to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings upon trial may be conducted in an orderly fashion by reference to those issues”, including to “provide the basis upon which evidence may be ruled admissible or inadmissible upon the ground of relevance”.
The only final relief sought by the wife in her further amended Initiating Application directly against either of the proposed third parties, whom she seeks to join, is that sought pursuant to s 106B and, consequent thereon, pursuant to (inferentially) s 79 of the Act. Insofar as she seeks a declaration, possibly pursuant to s 78(1) of the Act, that the husband has an equitable interest in D Street, which is registered in the name of C Pty Ltd, the shares in which are held by the brother solely, she does not seek any consequential relief in relation thereto; not even that be retained by him “for his sole use and benefit”, unlike the other property specified in paragraph 14(b) of the final orders sought in her further amended Initiating Application.
Accordingly, I shall consider the wife’s joinder application within the context only of the final relief sought in her further amended Initiating Application.
JOINDER - LEGAL PRINCIPLES
Rule 3.01 of the Rules provides:
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, must be included as a party to the proceeding.
Rule 3.03(2) of the Rules provides:
A party may add another party after a proceeding has started by amending the application or response to add the name of the party.
Rules 3.03(4) of the Rules provides:
A party may only add another party after the first court date with the leave of the court.
The “first court date”, to which reference is made in r 3.03(4) of the Rules, is defined in r 1.05(1) of the Rules to mean “the first hearing or other court event after an application or an appeal is filed (including a conference or procedural hearing)”.
It is common ground that leave of the Court is required for the wife to join the brother and/or C Pty Ltd as parties to this proceeding.
The requirements for joinder in r 3.01 of the Rules are conjunctive. A person must be included as a party to a proceeding if: (a) their rights may be directly affected by an issue in the proceeding; and (b) their participation as a party is necessary for the Court to determine all issues in dispute. See Pencious & Pencious [2010] FamCA 605 at [4], per Cronin J.
As referred to above, in Gould & Gould & Swire Investments Ltd at 80,451, Fogarty J said 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” (emphasis added).
However, the subsequent inclusion of the word “necessary” in r 3.01 of the Rules is significant. As Warnick J said in Wayne & Dillon and Anor [2008] FamCAFC 204 at [18], that word (albeit in the context of the similar provision in the former Federal Magistrates Court Rules 2001) “must mean something more than “useful” or “expeditious””. His Honour continued:
… 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”.
Further, in Arnold & Arnold [2021] FamCA 226, Carew J said at [50]:
In my view, and contrary to the submissions of the wife, when considering whether a party is “necessary”, it is relevant to consider whether or not the proposed order is “necessary”. To find otherwise, would suggest that as long as an order against a third party required something to be done, no matter how absurd, the party was “necessary”.
In Jordan & Sutton (No 2) [2022] FedCFamC1F 850 at [38], albeit in the context of an application to join third parties for the purpose of making orders against them pursuant to s 90AE of the Family Law Act 1975 (Cth) (“the Act”), Harper J referred to John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at [131], where the High Court stated that where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, that non-party is a necessary party and ought to be joined.
At [39] – [40], Harper J continued:
39.It does not matter whether a proposed party wishes to participate in a proceeding: Arida v Arida [2015] NSWCA 170, per Sackville AJA at [19] (with Bell P and Macfarlan JA agreeing).
40.It is well settled that, applying these principles, it can be appropriate to join third parties to a marriage to proceedings in this Court, for example, to bind them in respect of declarations as to property interests pursuant to s 78 or as ancillary to the exercise of discretion in s 79 or s 106B to set aside dispositions: Valceski v Valceski (2007) 70 NSWLR 36 at [31]–[33]; Khalif & Khalif (No 2) [2021] FedCFamC1F 308 at [37]. Clearly, according to these principles, the existence of claims for orders affecting the rights or interests of third parties proposed to be joined usually compels the conclusion that those parties are “necessary”. Such joinder is, nonetheless, an exercise of the Court’s discretion.
At [59], his Honour said:
… The question for the Court under r 3.01 will always be whether, in all the circumstances, joinder of third parties is “necessary”. Ultimately this is no different to the essential question posed to the Court by application of ordinary general law principles concerning joinder. Once the Court is satisfied that joinder is necessary, it will be ordered either under the mandatory terms of r 3.01 or in the exercise of discretion under the general law.
At [60], his Honour said that “the issue of necessity of joinder can only be addressed by considering all the circumstances of the case, which include affectation of the third parties’ interests or assets, questions of prejudice and case management issues”.
At [62], his Honour said, albeit in relation to applications under s 90AE of the Act, that “the question of the necessity for joinder of third parties … will be answered most readily by considering aspects of prejudice and case management considerations”.
At [67], his Honour considered the argument of the proposed third parties, who opposed joinder, that:
the question of their joinder was premature. They submitted that the wife has not demonstrated why it is necessary to join their clients at present in order to determine “all issues in dispute in the proceedings” in circumstances where the issues affecting the third parties are likely to be discrete, and that will only become relevant in circumstances where the relief sought by the wife, with respect to the shares, enliven the pre-emptive provisions in the Shareholders’ Agreement and the Note Subscription Agreement. It was argued that while it may become necessary in the future for the Noteholders to be joined to the proceedings, to do so now would be premature.
In that regard, his Honour said, at [68]:
I do not accept that joinder of a third party is only necessary where that party has an interest in respect of all issues. It is not uncommon in a case with numerous parties for some of them to have an interest in a limited number of issues. The requirement of the rule to compel joinder is to enable the Court to determine and dispose of all issues in the proceedings. The presence of a third party may be necessary as a party only for some issues as part of this process. Nor do I think the question of joining the Noteholders is premature. … The present formulation of the wife’s claim discloses the area of debate where the interests of the Noteholders are relevant and could be affected. If they should be joined, it is appropriate for this to happen as soon as possible.
Further, at [75], his Honour said that the fact that the claims against the proposed third parties “may appear largely discrete from other issues in the matrimonial cause between the spouse parties does not mean that at present they can be treated as entirely separate”. His Honour continued that the proposed third parties “may decide they should cross examine the wife or experts about, and make submissions about, the overall division of property. It would be unusual for non-parties to be permitted to cross examine parties, and the very fact they may apply to do so begs the question of why they should not be joined…”. Indeed, it may be wondered how non-parties could cross-examine parties (or any other witnesses).
In the result, Harper J concluded at [76] that the participation of the proposed third parties as parties was necessary and that they should be joined and, accordingly, he so ordered. However, his Honour continued at [77]:
This does not inevitably mean they must participate in all aspects of the hearing of the issues. The Noteholders can form their own view about the extent to which they participate. However, although they presently disavow any need to involve themselves in a number of issues between the husband and the wife, such as contributions during the relationship, it is open to them as parties to seek to cross examine the husband and the wife and to make submissions on such issues as part of their resistance to any orders binding them pursuant to s 90AE.
In Hankinson v De Vries and Ors [2013] FamCA 455 at [18], Kent J, in considering the predecessor to r 3.01 of the Rules (namely, r 6.02 of the former Family Law Rules 2001), said that “the focus of the rule, as is the focus of the law, is whether a party’s substantive rights would be affected by the relief sought in a proceeding”. His Honour at [19] drew a distinction between joining a party who may be a “necessary witness”, as opposed to a “necessary party”, saying:
As to participation “as a party” being “necessary”, the fact that persons may be necessary witnesses to a particular issue does not mean that they are necessary parties to the proceedings. In all the circumstances referred to and, in particular, the fact that the Applicant does not seek relief or orders directly against the Second or Third respondents and, critically, with respect to the shareholding, I am satisfied that the Second Respondent and Third Respondent are not “necessary parties” within the meaning of rule 6.02.
In Galante & Galante and Ors [2019] FamCA 756 at [36] – [38], Berman J said:
36.The critical consideration is that a party can only be considered a necessary party if an order is sought against them.
37.The argument put in opposition to the joinder of the second, third and fourth respondents is that no order is sought against them and given the size of the asset pool as conceded by the husband, even if successful in her claim against the second, third and fourth respondents, the property of the parties is sufficient to satisfy the wife’s claim.
38.No substantive relief is sought against the second, third and fourth respondents and as such there is no utility in their joinder.
DISCUSSION
I turn, therefore, to consider the conjunctive requirements of r 3.01 of the Rules, namely, whether the rights of each of the proposed further respondents may be affected by an issue in the case and, if so, whether their participation is necessary to enable the Court to determine all issues in the case.
Insofar as the Payments are concerned, the husband and his brother contend that, in circumstances where it is asserted that the net asset pool (including superannuation) available for division between the husband and the wife is approximately $5.4 million, it is not necessary to invoke s 106B of the Act in order for there to be a just and equitable division of property between them, as the Payments, if found to been made improperly, can be added back as against the husband.
The Case Outline filed by the brother and C Pty Ltd on 15 February 2024, in opposition to the joinder application and otherwise in support of the relief sought by them, comprises 49 pages, including 37 pages of submissions. The issues presently for determination by me are not complex. Insofar as the joinder application is concerned, s 26(2)(b)(i) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) provides that an appeal “must not be brought from a judgment … if the judgement is … a decision to do, or not to do, any of the following: … join or remove a party”. To my mind, that statutory provision evinces, prima facie, a parliamentary intention regarding the importance or, rather, otherwise of joinder applications. That is confirmed by the Explanatory Memorandum to the Federal Circuit and Family Court of Australia Bill 2019 (Cth) which, at [27], states as follows:
Article 14(1) of the [International Covenant on Civil and Political Rights] enshrines the right of a person to have a fair and public hearing by a competent, independent and impartial tribunal established by law. As noted in the UN Human Rights Committee’s General Comment No 32, an important aspect of the fairness of a hearing is its expeditiousness. This right is engaged through the limiting of appeals from certain decisions through the imposition of requirements to seek leave to appeal or preventing appeals against certain procedural or interlocutory decisions, creating the capacity for appellate jurisdiction to be exercised by a single Judge. Article 2(3) requires States to ensure that any person whose rights and freedoms as stipulated in the ICCPR are violated, that person shall have an effective remedy, which is to be determined by a competent judicial authority. The Bill predominately engages these rights through the provisions relating to the ability of both divisions of the FCFC to ‘go on circuit’, the use of audio or video link, vexatious litigants, suppression and non-publication orders, closed-court requirements, and case management provisions.
(footnotes omitted)
The reference to the UN Human Rights Committee’s General Comment No 32 is to the Human Rights Committee, General Comment No. 32 – Article 14: Right to equality before the courts and tribunal and to a fair trial, 90th session, UN Doc CCPR/C/GC/32 (23 August 2007), paragraph 27.
The Explanatory Memorandum further states, at [29]:
Clauses 26(2), 28, 55 and 155 of the Bill promote the right to a fair hearing under Article 14 of the ICCPR by facilitating the expeditiousness of the appeal system, and thus ensuring the right to a fair hearing when seeking review of a decision. These items provide circumstances in which an appeal must not be brought, and circumstances in which an appeal can only be brought with leave of the Court. Clauses 26(2) and 55 relate to interlocutory decisions, which are not determinative of a litigant’s final rights. Similarly, clause 28 limits a litigant’s ability to appeal interlocutory decisions that do not relate to child welfare matters. By circumscribing a litigant’s ability to appeal an interlocutory decision, unnecessary appeals will not be filed with the FCFC (Division 1). These items allow court resources to be better allocated to litigants who need to access their right to a fair hearing and have their final rights determined. As such, clauses 26, 28 55 and 15 promote the right to a fair hearing under Article 14 of the ICCPR.
(footnotes omitted)
In relation to the reference to “circumscribing a litigant’s ability to appeal”, the footnote thereto notes that that the right to appeal is not part of Article 14 of the International Covenant on Civil and Political Rights and refers to General Comment No. 32, paragraph 12, and to Communication No. 450/1991, I.P. v Finland, para 6.2.
I have read and considered the submissions of the proposed third parties and have taken them into account in my determination of the issues presently before me; however, I consider them to be, for present purposes, unduly complicative of what is, and should be, a relatively straightforward interlocutory matter.
Turning, first, to the wife’s joinder application in respect of C Pty Ltd. It will be readily apparent that, on no view of the wife’s case, as constituted by her further amended Initiating Application, could it be said that she meets the requirements of r 3.01 of the Rules, insofar as her application to join C Pty Ltd as a third respondent is concerned. It cannot be said that the rights of that company “may be directly affected by” the declaration sought in relation to D Street, of which it is the sole registered proprietor. The wife does not seek any final relief against C Pty Ltd, for example, that it holds its interest in D Street upon trust, to some presently unspecified extent, for the husband. She merely seeks a declaration that the husband has an equitable interest in D Street. Similarly, it cannot be said that the participation of C Pty Ltd is necessary for the Court to determine all (or, indeed, any) issues in dispute in the proceeding. That is because no consequential relief is sought in her further amended Initiating Application (as opposed to her statement of claim) against that company, for example, under s 90AE of the Act. See Kayce & Wilda (No 2) [2024] FedCFamC1F 405 at [30]. In any event, by the joinder application, procedural fairness in respect of the wife’s claim for declaratory relief in relation to D Street has been accorded to C Pty Ltd and, by its opposition thereto, it has nevertheless declined to participate in the proceedings. Accordingly, paragraph 2 of orders sought in the wife’s Application in a Proceeding, by which joinder of C Pty Ltd is sought, shall be dismissed.
Insofar as the joinder of the brother as a second respondent is concerned, as noted above, the husband and he contend that, even if the Payments (which, it will be recalled, total $465,000) are found to have been made improperly (which they deny), it is not necessary to join the brother and to set aside the Payments pursuant to s 106B of the Act. This is because, it is contended, the net asset pool (including superannuation) available for division between the husband and the wife, apparently on her own case at present, is approximately $5.4 million, such that the Payments can be added back as against the husband. See, for example, AJO & GRO [2005] FamCA 195 at [30(b)]. The brother, in the written submissions filed on behalf of C Pty Ltd and him, submits that:
153Sometimes, a questionable transaction will have an obvious adverse impact upon an asset pool such that it is plainly impossible for the Court to do justice to the innocent party without setting it aside. On other occasions, it is plain that the asset pool will be sufficiently large for the Court to do justice by way of an add-back, if that course is justified. Sometimes the position is not perfectly clear and the issue can only be resolved at trial.
154This case falls squarely in the second category. On the material available, the Court cannot conclude that it is reasonably possible that it will be necessary to set aside the impugned transactions in order to ensure the Wife receives a just and equitable division of assets. On the contrary, there are ample assets within the pool from which the Wife’s entitlement can be satisfied.
155To date, the Wife has not articulated her version of the asset pool anywhere in her material. In those circumstances, it is convenient to consider the Huband’s.
156Accepting the Husband’s material at face value, the asset pool comprises approximately $6.72million of non-superannuation assets, less $2.82million in liabilities, plus superannuation interests valued at $1.20million (total $5.10million).
157Within that asset pool, on the Husband’s version, there are eight real properties valued collectively at $6.18million and which are subject to mortgage debts totalling $2.737million.
158The result is that the Court has at its disposal real property valued in the order of $3.443 net of liabilities plus superannuation interests of $1.20million (total $4.643million) all of which could potentially become the Wife’s property in the section 79 proceeding without resort to any of the $465,000 that the Husband paid to the Brother.
159Working with a total net asset pool valued at $5.1million inclusive of superannuation, and even allowing for a full add-back of $465,000 against the Husband, it is inconceivable that the Wife could receive net assets totalling $4.643million. More realistically, it might be thought that an amount somewhere in the order of 3.34 million (i.e. 60%) would be comfortably within the range of potential outcomes.
(footnotes omitted)
I consider the opposition of the husband and his brother to this aspect of the joinder application to be misconceived. By her further amended Initiating Application, the wife seeks that the disposition of the Payments by the husband to his brother be set aside pursuant to s 106B of the Act and that those funds be paid to her, in specie, together with “[s]uch further funds … as this Honourable Court considers just and equitable”. Whether or not the setting aside of the Payments (and the payment thereof to her) is necessary is a matter for trial. At present, however, she seeks that the Payments, if set aside, be paid to her. That is distinct from the issue presently for determination, namely, whether joinder of the brother is necessary. In circumstances where the wife seeks that the Payments to the brother be set aside, which (if successful) would necessitate an order against him, I consider that:
(1)the brother’s rights may be directly affected by the s 106B application, in that, if successful, an order may be made against him, requiring him to disgorge the Payments; and
(2)his participation is therefore necessary for the Court to determine all issues in dispute in the proceeding, which include the s 106B application.
The brother, in the written submissions filed on his behalf (and on behalf of C Pty Ltd) refers to Arnold & Arnold, where Carew J said:
44I note that all parties agree that the principles applicable to a determination of a disjoinder application are analogous to those involving an application for summary dismissal. That seems to be a convenient approach in the circumstances of this case and one that has been adopted in other cases.
45However, in relation to the appropriate test to be applied in an application for summary dismissal, I note that since the Full Court decision in Pelerman (as cited by the parties), the Rules have been amended by the inclusion of r 10.12 which provides a statutory test for summary dismissal. The rule provides as follows:
A party may apply for summary orders after a response has been filed in the party claims, in relation to the application or response, that:
(a) The court has no jurisdiction;
(b) The other party has no legal capacity to apply for the orders sought;
(c) It is frivolous, vexatious or an abuse of process; or
(d) There is no reasonable likelihood of success.
46While various terms have historically been used to identify the applicable test when determining an application for summary dismissal e.g. that the claim is “doomed to fail”, the statutory test is as set out above, and relevantly for present purposes: that there is no reasonable likelihood of success.
(footnotes omitted)
I do not disagree with what her Honour said in that case, as a general proposition. Nevertheless, like fingerprints, no two cases are the same and each case must turn upon its own facts and circumstances. Unlike the present case, that was not a case involving an application under s 106B of the Act.
Her Honour said at [26], in the relation to the joinder of third parties for the purposes of s 90AE of the Act, that:
… It is argued that their involvement is particularly objectionable in circumstances where any order against the 2nd and 3rd respondents would only be and live and if the husband fails to comply with an order made against him and in circumstances where there is no evidence of the husband “being recalcitrant, forecasting or intimating any intention not to comply with any order” that may be made against him in the s79 property proceedings.
Her Honour referred at [54] to A Bank & Coleiro and Anor [2011] FamCAFC 157; saying that “while the facts were very different … the Full Court (Finn, Strickland JJ with whom Bryant CJ agreed) appear to endorse as relevant, whether the order against a third party was necessary”. However, that was a case where a (then) Federal Magistrate, inter alia, had made an order joining a bank to property settlement proceedings between the parties to a marriage in circumstances where there was no application before the Court seeking that the bank be joined and where the bank was not given notice of the proposed joinder or the opportunity to make submissions in relation thereto. Finn and Strickland JJ said at [121] that there was “no basis on the evidence that was before the Federal Magistrate at the time that his Honour made the order joining the bank to find that the bank was a ‘necessary party’ to the proceedings”. This was because, as their Honours said at [122] – [123]:
122.A subpoena duces tecum had been issued requiring the bank to produce certain documentation. The bank produced documents in answer to that subpoena. The issues that then arose required nothing more than for the wife to raise with the Federal Magistrate a claim that the bank had not fully complied with the subpoena and that there were further documents that should be produced. Then the appropriate way for the Federal Magistrate to deal with that claim would have been to make an order, for example, for further documents to be produced by the bank, extending possibly to requiring an affidavit to be filed addressing the issues with the documents produced to that point or alternatively a subpoena to the appropriate bank officer to give evidence and produce documents. Indeed, his Honour made such an order for further documents, appropriately we say, on 7 April 2011 as referred to above in paragraph 79.
123.It was neither appropriate nor necessary for the Federal Magistrate to join the bank at that point. However, it is apparent from what the Federal Magistrate said on 21 April 2011 that he had a collateral purpose in making the joinder order. He was using it as a way of getting the bank to appear before him and to allow the wife to pursue a claim for “compensation or restitution” against the bank. Yet, it was unnecessary to join the bank to achieve these purposes (if indeed they needed to be achieved). The bank could have been required to attend in the context of the alleged non-compliance with the subpoena that had been issued, and if the wife sought to make a claim against the bank the rules permitted the wife to name the bank as a party to any such proceedings, or to seek leave to do so.
In relation to the reasons given by the Federal Magistrate for the joinder, their Honours said at [124] that “none of the matters referred to justify a joinder order as opposed to an order in relation to the subpoena that had already issued”.
In the result, the Full Court in A Bank & Coleiroand Anor found at [134] that the Federal Magistrate erred in joining the bank “at the time that he did and in the circumstances that prevailed at that time”. However, their Honours noted at [135] that the wife in that case had since filed an amended application (at first instance), which was pending, seeking formally to join the bank and seeking orders against it, but expressed no views, preliminary or otherwise, in relation to it. Therefore, I respectfully do not necessarily agree with the view expressed by Carew J in Arnold & Arnold that Finn and Strickland JJ, in A Bank & Coleiro and Anor, “appear to endorse as relevant, whether the order against a third party was necessary”.
Returning to the decision the decision of Carew J in Arnold & Arnold, I consider that the gravamen thereof is to be found at [56], where her Honour said:
In the current case, the wife concedes that she cannot establish, at this time, that the order she seeks against the 2nd and 3rd respondents is reasonably necessary or reasonably appropriate to effect a division of the parties’ property. Indeed, the very order sought by the wife and her submissions resisting the disjoinder clearly contemplate that the order against the 2nd and 3rd respondents may not be necessary. The wife also concedes that the Court would “probably” not be able to be satisfied that it is just and equitable to make an order under s 90AE if there were a reasonable alternative, and it is accepted by her that there might be an alternative order i.e. for a sale of the shares.
In the circumstances, I consider that decision to be distinguishable, on the facts, from the present case.
The husband and the brother also rely upon the first instance decision of Treyvaud J in Gelley & Gelley (No 2). However, unlike in the present case, his Honour there heard and substantively determined, after cross-examination of the applicant wife, an application pursuant to the statutory predecessor of s 106B (namely, s 85), prior to the s 79 application. Further, again unlike in the present case, the dispositions in that case were post-separation trust distributions to the parties’ adult children, who were eligible objects of discretionary trusts, to whom distributions had also been made prior to separation. Although the wife sought to impugn and set aside the post-separation trust distributions to the adult children, it was not suggested that, as objects of the discretionary trusts, they were not eligible to receive the distributions (unlike the brother, in respect of the Payments, in the present case). Having heard the setting aside application, Treyvaud J ordered that it be permanently stayed because, inter alia, his Honour was satisfied that “the husband had, and has, the capacity to meet the wife’s claim, let alone to satisfy a reasonably anticipated order, which would certainly not exceed the wife’s claim” (at p79,156).
However, in so doing, importantly to my mind, his Honour said at p 79,155:
… The purpose of the Family Trusts was clearly to take advantage of taxation legislation so as to maximise the quantum of money is distributed to beneficiaries. The purpose of the Trusts was clearly not to accumulate income, rather it was to distribute income for the benefit of the beneficiaries. I see nothing sinister in the distributions of June 1990 or June 1991. I pointed to the evidence of Mr. H on this issue, that the distributions were ‘normal and prudent’.
Accordingly, I consider the decision of Treyvaud J in Gelley & Gelley (No 2) to be distinguishable from the circumstances in the present case because, inter alia, unlike in that case, the entitlement of the brother to receive the Payments is a matter that is disputed and which must await trial.
Further, I consider that, at the current juncture in these proceedings, it is premature to conclude finally that an order under s 106B is not necessary. The proceedings have not yet been set down for trial and, being in my docket, are unlikely to be so until sometime next year. Valuations of real properties were undertaken in late 2022 and early 2023 and are now out of date. The values of assets and the quantum of liabilities may fluctuate, including by decrease in the case of the former and increase in the case of the latter.
Insofar as the husband and his brother effectively seek the summary dismissal of the s 106B application, they submit that, even if there was any impropriety in relation to the Payments (which they deny), there are sufficient assets available for division between the husband and her at trial against which to adjust therefor. However, that is not the test for summary dismissal.
Section 46(2) – (3) of the FCFCOA Act relevantly provides:
2.The Federal Circuit and Family Court of Australia (Division 1) may give judgment for one party against another in relation to the whole or any part of a proceeding if:
a.the first party is defending the proceeding or that part of the proceeding; and
b.the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
3.For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
a. hopeless; or
b. bound to fail;
for it to have no reasonable prospect of success.
Rule 10.09(1)(d) provides, inter alia, that a party may apply for summary orders after a response has been filed if the party claims, in relation to the application or response, that
…
(a) it is frivolous, vexatious or an abuse of process; or
(b) there is no reasonable likelihood of success.
In Arnold & Arnold, Carew J said at [46] – [47]:
46While various terms have historically been used to identify the applicable test when determining an application for summary dismissal e.g. that the claim is “doomed to fail”, the statutory test is as set out above, and relevantly for present purposes: that there is no reasonable likelihood of success.
47The decision to summarily dismiss a claim should nevertheless be “sparingly employed”. The overriding guiding principle remains “doing what is just”.
(footnotes omitted)
In relation to r 10.09(1)(d), namely, no reasonable likelihood of success, her Honour referred to Friar & Friar [2011] FamCAFC 71 at [52]. In that case, the Full Court allowed an appeal against the summary dismissal by the primary judge of an application for a declaration pursuant to s 78 of the Act. Thackray and Watts JJ, after observing at [52] that “for the purposes of an application for summary dismissal under the Act, the test is that laid down by the Rules, namely that the claim must be ‘frivolous, vexatious or an abuse of process’ or has ‘no reasonable likelihood of success’”, continued at [53] that –
Regardless of the formulation, “exceptional caution” must be used in applications for summary dismissal and the power should be “sparingly employed”.
In so holding, their Honours referred to General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129, per Barwick CJ.
I consider that, even if, at trial, it transpires, as the husband and his brother contend, that resort to s 106B is unnecessary, that is different to the application pursuant to that section having “no reasonable likelihood of success” at this juncture in the proceeding. Accordingly, I do not accept, at this interlocutory stage, that the s 106B application, whilst possibly ultimately unnecessary, has no reasonable likelihood of success.
If it ultimately transpires that the husband and his brother are correct in this respect, the remedy, especially in the case of the brother, may lie in an application for costs against the wife. Indeed, it will be recalled that their opposition to joinder of the brother, for the purposes of the s 106B application, is founded, in part, upon their submission that the application is unnecessary because there will be sufficient remaining funds available against which to adjust for the Payment, if founded to have been improperly made. On the husband’s case, the wife will retain and receive property, the net value of which will total several millions of dollars. Therefore, there is no appreciable risk that, if the wife is unsuccessful, she will be unable to meet any order for costs that may be made in favour of the brother.
CONCLUSION
Accordingly, I shall order that the brother be joined as a second respondent but shall dismiss the joinder application insofar as it seeks the joinder of C Pty Ltd. Further, I shall order that the wife’s statement of claim be struck out and that, within 28 days, she file and serve points of claim in support of the relief sought by her against the brother pursuant to s 106B of the Act, in paragraph 3 of her further amended Initiating Application, and in relation to D Street, in paragraph 13 thereof.
I shall otherwise adjourn the balance of the wife’s Application in a Proceeding to a Senior Judicial Registrar on a date to be fixed for determination, insofar as the relief sought therein is within their delegated powers, and otherwise for case management and, if necessary, relisting before me.
Given the joinder of the brother, who is the sole director and shareholder of C Pty Ltd, in respect of which the joinder application has been unsuccessful, any application for costs, whether by the wife against the brother (in respect of her successful application to join him) or by C Pty Ltd against the wife (in respect of her unsuccessful application to join it), can await the finalisation of this proceeding.
I certify that the preceding ninety (90) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Strum. Associate:
Dated: 28 June 2024
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