We are increasingly seeing applications to join third parties in matrimonial and de facto property court proceedings.
This is because in 2004 Part VIIIAA was introduced to the Family Law Act, giving the Court powers to make orders and injunctions against third parties. A third party can be defined as a person or entity other than the two people in the intimate relationship.
Third parties can be:
It is common for a long standing family business to play a leading part in the assets and financial resources of the relationship. This means elderly parents of a separated child can be drawn into court proceedings as the trustees or appointors of a family trust and/or directors and shareholders of a family company that their child worked for during the relationship.
This can happen for a number of reasons, including:
Before the introduction of Part VIIIAA in 2004, the Court could make orders altering the property interests of a party to the marriage, either as part of a property settlement or to protect property by way of an injunction. These new laws give the Court the power to make an order binding on individuals and entities not a party to the marriage under section S90AE or S90AF, but only if:
The power of Part VIIIAA of the Family Law Act is so vast that an order made under this section can override any other law of the Commonwealth, State or Territory, as well as override any trust deed or other written agreement. A third party cannot be deemed to be breaching any other law or agreement by complying with an issued order.
Given the significance of this power, the Court is careful not to be ‘trigger happy’. Judges go to great lengths to explain in their judgments that the power and discretion of the Court:
To join a third party to proceedings, naming the person or entity as a respondent in their Initiating Application, or amending their Initiating Application later requesting the third party be joined is sufficient. It is therefore relatively simple to bring another person or entity into a property dispute. However, a third party has the right to be heard as to whether they should be joined, if they believe their connection to the division of property is tenuous. They can also ask the Court to exercise their discretion not to make orders that will affect them.
To be successful in obtaining an order affecting a third party, an applicant must prove that S90AE or S90AF should be invoked by showing that:
Further, Rule 6.01 of the Family Law Rules says,
“A person whose rights may be directly affected by an issue in a case, and whose participation as a party is necessary for the court to determine all issues in dispute in a case, must be included as a party to the case. ”
It is important to note that before joining a third party, consideration must be given to the costs that are likely to be incurred by third parties through their involvement. Their costs have to be compared against what might be gained financially by an application to include them. Put simply, the net gain must be significant because the third party can obtain an oppressive costs order against the applicant, should the applicant be unsuccessful in their action against the third party.
This article was written by Senior Associate, Catherine Leis.
Practice Area: Family Law