You, me and ‘we’: Is your business susceptible to being joined as a party to family law proceedings?

22 January 2020
Rose Lockie, Partner, Melbourne

Business doesn’t always stay in the boardroom. 

Business partners not only form commercial relationships with each other but may also unwittingly form relationships with each other’s life (or one night) partners. 

If your business partner is going through a family law separation, you should be aware that you, or the business, may be joined as a party to the family law proceedings.

The third party provisions of the Family Law Act give power to the Family Courts to join third parties and make orders which directly affect the rights of third parties, when the court is satisfied that it is just and equitable to do so in effecting a property settlement between separated spouses.

Third parties may include trusts, companies and creditors.  Business partners of separated spouses are particularly vulnerable.

There are a number of reasons why third parties may be joined to family law proceedings, including but not limited to situations where:

  • the third party may have an interest in property that forms part of the asset pool;
  • the third party needs to be restrained from dealing with property that forms part of the asset pool;
  • the orders sought can only be carried out or need to be facilitated by the third party;
  • a transaction occurred in favour of a third party that was designed to defeat a spouse’s claim; or
  • an order or declaration is sought against a third party to determine what is appropriately to be included in the divisible asset pool.

However, threats of joinder can also be made for nefarious purposes, including ‘fishing’ for documents or information from the third party.  Spouse parties have the ability to utilise the subpoena process to obtain discovery from third parties, and this process should be exhausted before a joinder application is made.

When notified about the possibility of being joined to proceedings, it is imperative for third parties to get advice early, to consider immediately whether to oppose or cooperate with the joinder application.  Joinder applications can be successfully opposed and costs awarded against the spouse party, where it can be demonstrated that the quest for discovery was an improper purpose upon which to seek to join the third party, for example.  Joinder applications can also be successfully opposed where the party seeking to join them has not demonstrated that the Court would need to make an order directly against the third party in order to effect a just and equitable division of the assets between the spouse parties.

Likewise, third parties who have been issued with a subpoena to produce documents or information should also seek advice prior to complying with the subpoena, regarding the scope of the subpoena and the costs involved in complying with the subpoena.

Given the potential costs implications that may flow from issuing a subpoena or a joinder application unnecessarily or prematurely, it is also imperative that spouse parties exercise due care and diligence and seek proper advice when considering whether to involve third parties in their family law proceedings.

 

 


Authored by:

Jodylee Bartal, Partner
Siobhan McGee, Lawyer

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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