Property settlement allowed out of time – Stuart & Lawson [2015] FCCA 3299 (10 December 2015)

Property settlement allowed out of time – Stuart & Lawson [2015] FCCA 3299 (10 December 2015)

Last Updated: 15 December 2015

FEDERAL CIRCUIT COURT OF AUSTRALIA

Legislation:  Family Law Act 1975 , ss.44(3), 44, 75, 79, 90D

REPRESENTATION

ORDERS

(1) The Wife be granted leave to institute property proceedings out of time.
(2) The Applicant’s legal representative forthwith advise the Registrar of the Supreme Court of these orders.
(3) The matter be adjourned for mention before me at 9.30a.m. on 11 March 2016.
(4) Each party respond promptly to any request for financial information.
(5) By no later than 28 January 2016, the parties engage an accredited real estate valuer to prepare a joint valuation of the Property A property and share equally the costs of such valuation.
(6) By no later than 28 January 2016, the parties exchange Superannuation Information Forms in relation to all superannuation entitlements held by each of them.
(7) The Applicant’s solicitor provide the Court with a collaboratively prepared balance sheet on the adjourned date.

REASONS FOR JUDGMENT

Introduction

1. The Wife has filed an application for leave to institute property proceedings over 7 years out of time pursuant to section 44(3) of the  Family Law Act 1975 . The Husband opposes the application and seeks costs.
2. Each party was represented by counsel at the hearing.

Background

3. The Wife is 46 years of age. The Husband is 49 years of age. Both were born in (country omitted). They married on (omitted) 1998, and migrated to Australia in the same year. They separated under the one roof in 2003 and lived in separate residences from February 2004. The parties’ divorce became final on 13 November 2006.
4. There are three Children of the marriage, X aged 16 years, Y aged 15 years and Z aged 11 years.
5. After separation, the Children remained living with the Wife, initially in rented accommodation in (omitted). The Husband remained living in the former matrimonial home in Property A. In June 2004, the Children and the Mother relocated to (country omitted) and remained living there until December 2013, when the Mother, her second husband, their child together, and the parties’ three Children returned to live in Brisbane, Australia. The Children have not spent any time with the Father since late June 2004.
6. The Wife is studying full time for a (course omitted) through the University (omitted). She expects to be qualified to work as a (occupation omitted) from 2016, and hopes to obtain a position as a (occupation omitted) on a salary of approximately $60,000. She remarried in (omitted) 2010, and there is one child of that marriage, W aged 4 years. The Wife, her husband and all the Children are living in rented accommodation in Queensland. The Wife says they are struggling financially.
7. The Husband is a qualified (occupation omitted). He is employed as a (occupation omitted) with (employer omitted) at (omitted). He remains living in the Property A property.
8. The only non-superannuation asset of significance is the former matrimonial home at Property A, owned by the parties as tenants in common in equal shares.^[1] The property is valued at between $740,000 (as estimated by the Wife) and $650,000 (as estimated by the Husband). The loan balance secured by a mortgage over the property is, according to the Husband, approximately $180,000.

Supreme Court proceedings

9. On 12 June 2014, the Wife initiated proceedings in the Equity Division of the Supreme Court seeking an order for the sale of the Property A property by a Trustee, and for the net proceeds to be divided equally between the parties.^[2]
10. On 11 July 2014, the Husband filed a Notice of Motion seeking a stay of the Supreme Court proceedings. He sought the stay on the basis that he wished to pursue an application in the Federal Circuit Court of Australia for parenting and property settlement orders. In his affidavit filed in support of the Notice of Motion the Husband stated^[3]:
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    On 23 May 2014, my solicitors sent a letter to the plaintiff’s solicitors stating that, in light of the existing Family Law orders made by the Federal Magistrates Court of Australia in 2006, the appropriate course for a financial settlement was for an application to the Federal Circuit Court of Australia for property adjustment orders.

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…

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I have instructed my solicitors to file an application in the Federal Circuit Court of Australia for parenting and property settlement orders. Those orders will include orders for the final settlement of the Property A property as well as other property.

<li “=””>

…

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To avoid unnecessary legal costs and wasted time, I wish to have all my parenting and property disputes with the plaintiff finally dealt with in one Court, and in a single set of proceedings.

11. The Husband’s draft Initiating Application to this Court is annexed to the Husband’s affidavit in support of the Notice of Motion. The Husband was proposing that, upon payment of an amount to be determined, the Wife would transfer to the Husband her interest in the Property A property.
12. The Wife sought to have the Husband’s Notice of Motion dismissed. In her affidavit filed in the Supreme Court on 22 July 2014 she states^[4]:
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    We were divorced on 13 November 2006 so the one year limitation period expired on 13 November 2007, more than six years ago. Whilst that period can be extended by the Federal Circuit Court for good reason, the long delay and the pendency of these proceedings in the Supreme Court of New South Wales make it quite unlikely that the Federal Circuit Court would extend the limitation period.

…

It appears that he is simply creating “family law” issues artificially to give the impression that proceedings in the FCC are necessary and inevitable…Even if he were able to convince a Judge of the FCC to extend the 1 year time limit, property proceedings therein would be lengthy and expensive, whereas a sale order in the present proceedings will bring swift and effective justice to the parties.

13. The Husband’s Notice of Motion was dismissed. The Supreme Court proceedings were listed for final hearing on 20 February 2015, but by that time, the Wife had changed her position. She applied to vacate the hearing to make an application to this Court to institute proceedings out of time. The Supreme Court proceedings have been adjourned pending the determination of these proceedings.
14. The Husband has also changed his position. He now seeks to have the Wife’s application finalised in the Supreme Court and opposes the Wife’s leave application to this Court. He deposes to incurring legal fees and disbursements of $11,000 in the Supreme Court proceedings.^[5]

Legal principles

15. Section 44(3) of the  Family Law Act 1975  (Cth) (“the Act”) provides that property proceedings must be instituted within 12 months of a divorce order taking effect unless the court grants leave to institute the proceedings out of time, or both parties consent to leave being granted.
16. The Wife filed her application in this Court for leave and for property adjustment on 30 April 2015, over 8 years after the divorce order was made final in November 2006 and over 7 years after time for the filing of the property application expired. In her substantive application, the Wife seeks a 50 per cent share of the net value of the parties’ property in Property A by way of property settlement. She seeks an order that the Husband pay her share directly to her, or that the property be sold and the net proceeds of sale divided equally between the parties.
17. Section 44 provides:

The court shall not grant leave under section 44(3) and (3A) unless it is satisfied:

(a) that hardship would be caused to a party to the relevant marriage or a child if leave were not granted.

18. The authorities make clear that the Court must adopt a two-step process. The first question is whether the court is satisfied that hardship would be caused to a party or a child of the marriage if leave were not granted. If hardship is established, the question is whether the Court, in its discretion, should grant leave when consideration is given to the reasons for delay, prejudice to each party, interests of third parties, and each party’s financial position.
19. The Court’s discretion to grant leave is only enlivened if hardship is established.^[6]

Will the Wife suffer hardship if leave is not granted?

20. An applicant must suffer “substantial detriment” to establish hardship in subsection 44(4)^[7]. In the Marriage of Hall^[8], the Full Court said:
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    Fundamental to that is a determination of the quality, or character, of the potential claim.

21. In relation to hardship, the Full Court in Whitford said^[9]:

The requirement, that the Court must be satisfied that a hardship will be caused if leave were not granted, implies that it must be made to appear to the Court that the applicant would probably succeed, if the substantive application was heard on the merits. If there is no real probability of success, then the Court cannot be satisfied that hardship would be caused if leave were not granted…if the probable result of a hearing on the merits is that the hardship is not likely to be alleviated, then the Court cannot be satisfied that the Applicant or the child would satisfy hardship if leave were not granted…

22. The Full Court in Sharp & Sharp^[10] summarised the approach to hardship as follows:

It is well accepted that hardship for these purposes is more than the loss of a right to commence proceedings. It is the consequences attending the loss of the right to commence proceedings that constitutes hardship. That is a matter to be determined by the circumstances of the particular case.

In assessing hardship in this context the well established test is that the applicant must have a prima facie claim worth pursuing or a “real” probability of success. Further, leave will not be granted if to do so would not, in the substantive result, alleviate that hardship. However, whether or not hardship exists is not to be assessed only by reason of the monetary value of the probable order to be made if leave were granted.^[11]

23. The onus is on the Wife to establish hardship.
24. The Wife relies on her Application filed on 30 April 2015, her Financial Statement filed on 12 October 2015, affidavits filed on 30 April 2015 and 12 October 2015, and Annexures 2, 6, 9 and 24 to the October 2015 affidavit.
25. The Wife says that she made the greater section 79(4) contributions both during the marriage and after separation, and it would be unreasonable and unjust for her contributions to the welfare of the family in her capacity as homemaker and parent, not to be considered in any property adjustment. The Wife deposes to the following:
    1. At the commencement of cohabitation, neither party had any assets of significance. While the Wife had a 50% legal interest in two condominium properties in (country omitted), her father paid the deposits, the balance of the purchase price was paid with loan funds and her father met all the mortgage payments and other outgoings on the two properties. The Wife believes she was a registered owner for tax purposes, and did not consider she had any equitable interest in either of the two properties. Prior to her father’s death in (omitted) 2011, at his request, the Wife transferred her interest in the properties to her mother and brother, and did not receive any consideration for the transfers. She says that one of the properties has since been sold to a third party.
    2. At the commencement of cohabitation, she was employed full time as an (occupation omitted) at the (country omitted) . She gave up a promotion and resigned from that position to migrate to Australia after her marriage. Upon arriving in Australia, the Wife worked full time for (employer omitted) on a contract basis, and from (omitted) 1998 was employed full time as a (occupation omitted) at (employer omitted). Her salary was approximately $55,000 per annum. She was concurrently studying for a (course omitted) at (omitted). In (omitted) 1999, the Wife changed to part time work at (employer omitted) until X’s birth in (omitted) 1999. She took two months paid maternity leave, before returning to work in September 1999. She paid for X’s child care and dropped her off and picked her up each day. She ultimately reverted to part time employment with (employer omitted) because the demands of her job did not fit in with X’s child care hours. In or around June 2000, she left her employment to care for X and prepare for Y’s birth. She studied and obtained her (qualifications omitted) in 2002.
    100. During this time, the Husband was employed full time at (employer omitted) as a (occupation omitted) on a salary of approximately $62,000 per annum.
    4. In April 2000, the parties purchased the property at Property A for $312,000 which then became the family residence. The parties equally contributed to the 5% deposit for the property, the stamp duty and the other costs associate with the purchase from their savings, from money lent to the Husband by his brother (subsequently repaid by the parties) and from money given to the Wife by her father. The remainder of the purchase price was paid with loan funds secured by way of mortgage to (omitted) Bank, the loan being approved on the basis of the parties’ two incomes.
    5. Until November 2000, the parties contributed equally to the mortgage on the Property A property, her share of the mortgage being met from money given to her by her parents. From approximately November 2000, all mortgage payments were met from the Husband’s income. The Husband gave her about $500 a month for living and sometimes utility expenses, so her father and other family members had to send money to cover necessary expenses. Based on bank statements and her recollection, the Wife believes the total amount her family contributed during that period was approximately $73,000.^[12]
    6. She was responsible for the running of the household, including budgeting and for the care of the Children during the relationship. She undertook the majority of household tasks. The Husband worked during the week and often played tennis on Saturday mornings.
    7. The parties had a “huge fight” over the interference of the Husband’s mother in January 2001, which resulted in the Wife being injured and requiring several stitches.^[13] She then took the children to (country omitted) for 3 months. She took other trips to (country omitted) with the Children between mid-2000 and 2003, the costs paid for by her family.
    8. After separation, the Husband was ordered to pay child support of approximately $1,500 per month for the Children. The Wife says that he paid around $986, with the Husband insisting that “the balance should go towards your share of the mortgage payments on the property.”^[14] The Wife agreed to accept this amount by payment directly to her, rather than via the Agency. Her mother came to Sydney from (country omitted) to help with the children, bringing money to help with their expenses. Her father continued to provide her with financial assistance, and she received some support from Centrelink. Nevertheless, the Mother struggled to meet rent and living expenses. The Children’s living standards fell.
    9. In May 2004, the Husband slapped Y on the face and the Children were frequently returning upset after time with the Father.^[15] In or around June 2004, she decided to return to (country omitted) with the Children to improve the quality of their lives, surrounded by family. She had a discussion with the Husband about her decision, and the Husband said^[16]:
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       I’ll only let the children leave if you contact the Child Support Agency and cancel the child support arrangements, and sign an agreement where you will accept $50,000 for your interest in the Property A property.

The parties signed an Agreement in relation to their financial issues on 2 June 2004.^[17] The Wife then contacted the Child Support Agency, cancelled the Husband’s child support liability, and until around October 2014, she was solely responsible for all costs associated with the accommodation and care of the Children. The Husband never paid her $50,000 agreed between them, nor any other amount for her interest in the Property A property. The Husband made little effort to communicate with the Children while they lived in (country omitted). On one occasion, the Wife asked for financial help from the Husband and he refused. The Wife was heavily financially dependent on her parents. She worked and studied and relied on her mother and aunt to look after the Children.

10. In June 2010, the Wife remarried and had another child in (omitted) 2011. The Wife and her husband decided to return to Australia in December 2012. The Husband refused to counter-sign passport applications for Y and Z, though agreed to sign a passport application for X. Despite the Husband’s refusal, the three Children were granted passports in July 2013, and the Wife, her husband, their child and the parties’ three Children returned to live in Brisbane in December 2013.
11. In September 2014, a child support assessment issued which required the Husband to pay $472.25 per month from July 2014. This increased to $1,160.75 per month from November 2014. The Husband started paying child support in December 2014.

50. She has not received any rent for the Property A property since the parties’ separation.

26. In her Financial Statement sworn in October 2015, the Wife deposes to being a full time homemaker with a total income of $461 per week, made up of $290 in child support and $171 in Centrelink payments. The Wife’s mother is paying her legal fees and education expenses, a total of $903 a week and she is otherwise supported by her husband who earns an income of $58,708 a year as a (occupation omitted). The Wife’s only significant asset is her share in the former matrimonial home at Property A, home contents and bank account proceeds of under $800. She deposes to owing her mother $64,655. She has a total superannuation entitlement of $5,800 and financial resources valued at $36,000. The Wife deposes to expenses well in excess of her income.
27. The Husband does not concede the Wife would suffer hardship if leave was not granted. While he does not dispute that the Wife is entitled to a share of the Property A property, he argues that the matter should proceed in the Supreme Court where the Wife initiated proceedings. He relies on his Affidavit sworn 20 July 2015 including Annexure B, and his Affidavit sworn on 16 October 2015 and Annexure L1.
28. The Husband deposes to having made the vast majority of the financial contributions to the assets of the marriage. He deposes to being in full time employment during the marriage while the Wife became a full time homemaker from early 2000, prior to the birth of their second child. The Husband deposes to the parties equally sharing the monthly mortgage repayments until November 2000, and thereafter to himself solely meeting all monthly mortgage repayments and utilities on the home. The Husband deposes to applying his income during the marriage to the benefit of the family, including meeting the mortgage repayments and all outgoings on the home. He deposes to making a substantial contribution to domestic tasks (with the exception of cooking) and doing all the handiwork around the home. He deposes to helping with the care of the Children during weekends and holidays and when he was not working. He has continued to meet the mortgage payments on the home and all outgoings on the home since separation, and he has continued to maintain the property.
29. While the Husband deposes to the Wife’s parents meeting the costs of the Wife and Children travelling to and from (country omitted) during the marriage, he disputes the level of financial support the Wife claims the parties received from her parents and denies the extent of the Wife’s non-financial contributions. The Husband denies ever causing any harm to the Wife and disputes the Wife’s version of events as to the reasons for their separation. He says he did not consent to the Children living in (country omitted).
30. Between February 2004 and June 2004, the Husband deposes to paying child support in the sum of $1500 a month, and denies that he reduced the payment by way of a “deal” as she asserts. The Children were spending time with him each Saturday before the Wife moved to (country omitted). He agrees that from June 2004, he did not pay child support until late 2014 when the Child Support Agency advised him of his liability.
31. In July 2015, the Husband deposes to an income of $78,364 a year from his employment (net $55,328) as a (occupation omitted), approximately $6,600 of which he receives in superannuation. He pays $418 a week towards the mortgage loan on Property A, and $290 a week in child support payments. His assets include Property A which he values at $650,000 (net $470,000) home contents, a car valued at $1,400 and bank account proceeds of less than $10,000. He has a superannuation entitlement of $236,282.60.
32. The Wife’s counsel submits that the Wife would suffer hardship if she were denied the opportunity to seek property orders under s.79 of the  Family Law Act . Counsel submits that her significant contributions during the marriage to the care of the Children and welfare of the family, and her care of the Children since separation with no assistance financially, emotionally or physically from the Husband for 10 years, would not be taken into account if the matter were determined in the State Court. The Wife’s counsel submits that the Wife has had no financial support for the Children until late last year, and she would suffer considerable hardship if she did not receive her just entitlement for this significant contribution. Counsel submits the Wife was poorly advised when she commenced proceedings in the Supreme Court. Counsel submits that the Husband’s past financial and non-financial contributions to the Property A property should be offset by the Wife’s past contributions to the welfare of the Children without any assistance from the Husband for 10 years. Counsel submits the section 75(2) factors favour the Wife as she has diminished earning capacity as a result of her care of the Children, both in the past and into the future. Counsel submits further that the Husband has been living in the Property A property while the Wife has had to rent, with no accounting to the Wife for his exclusive occupation of the property. The Husband is unlikely to have been in a position to remain in the property had he properly undertaken his responsibilities as a parent, both financially and physically.
33. The Husband denies the Wife would suffer hardship if leave were not granted. He does not accept the Wife has fully disclosed her financial position. He deposes to the Wife telling him during the marriage that she owned two units in (country omitted) and she may still hold those interests. He states that the Wife may also have an inheritance from her late father. While he accepts that the Children have not seen him since June 2004, he says that the Wife is supported by her husband and her mother and now receives child support in accordance with the Agency assessment from him.
34. The Husband says he would suffer hardship if leave were granted. He has met all the mortgage payments on Property A since separation 12 years ago, and all the outgoings on the property. An order for costs was made against him in the Supreme Court when he withdrew his Notice of Motion on 7 August 2015, and he would suffer further financial loss if the proceedings were not continued in that Court. The Husband’s counsel submits that the Wife has a remedy in the Supreme Court.
35. It is common ground that the Wife has a claim for property adjustment. The question is whether she will suffer hardship if not granted leave to proceed under the  Family Law Act  as opposed to the Conveyancing Act NSW. In the application under State law, the Court cannot exercise discretion to apportion the value of the Property A property to the Wife by taking into account her contribution to the Children during and after separation, and other relevant matters including her future needs.^[18]
36. I am satisfied that the Wife is likely to suffer hardship if leave is not granted.

Should the Court nevertheless grant leave?

37. The Wife sets out the chronology of events since the parties’ separation in an effort to explain why over 7 years passed before she commenced proceedings in this Court. In late 2007, the Wife received a draft section 90D Financial Agreement which she says did not reflect the parties’ agreement. She could not afford a solicitor to respond to the Husband’s solicitors. She was working on contract earning a modest income and relying on her parents for free accommodation, a car and living expenses. In late 2009, the Wife used funds from her mother to engage family lawyers in Sydney, but the Husband did not reply to their calls or correspondence and the money ran out.^[19] By then the Wife’s father was very ill and her sister was diagnosed with breast cancer, so she could not ask her parents for more money for legal fees. The Wife was not in a position to return to Australia at that time, and was helping her mother care for her father who died in (omitted) 2011. Given the Husband did not consent to the Children’s new passports, the Wife took considerable time to obtain their passports. This delayed her move to Australia until late 2013. Once she had the Children settled into school, she determined to resolve the property issues with the Husband. While she had been accepted to start a (course omitted) at the University (omitted) prior to leaving (country omitted), she decided to defer for one year while she invested her time and money into recovering her share of the parties’ assets. She found she was not entitled to legal aid. In or around 2014, the Wife instructed lawyers to negotiate with the Husband, but those negotiations were unsuccessful. Her mother lent her funds to meet her legal fees. She was advised that it would be quicker and easier in the Supreme Court, so she accepted that advice. In June 2014, the Wife commenced proceedings in the Supreme Court. The Wife has since learned that her contributions as a parent would not be taken into account in the Supreme Court proceedings, nor the impact of her parenting role on her earning capacity or inability to build a superannuation fund. The Wife says her career has been seriously compromised as a result of her role as primary carer for the Children, while the Husband has been free to pursue his career without interruption.
38. It is not in dispute that the parties made a number of attempts to resolve the division of the Property A property after the time had expired for the commencement of property proceedings in November 2007. The Husband deposes to efforts he made to finalise the property dispute with the Wife in 2006, 2007 and in 2008. The parties made offers to each other; each retained lawyers to correspond with the other; the Husband (through his lawyers) prepared a Binding Financial Agreement for the Wife’s consideration. The evidence discloses that both parties recognised the need for a property settlement right up until the time proceedings were initiated by the Wife in the Supreme Court in 2014. At that time, the Husband wanted to have proceedings heard in this Court for both property and parenting issues and also proposed seeking leave to file out of time. The Wife, on the other hand, wanted to pursue an Application in the Supreme Court, on advice it would be cheaper and quicker. It is common ground that each party changed position, the Wife now seeking leave to have the property proceedings resolved in this Court, the Husband wishing to stay in the Supreme Court.
39. While I agree with the Husband’s counsel that the delay is substantial, and that the Wife had demonstrated her capacity to seek advice from a lawyer, I am satisfied, on the basis of the Wife’s chronology of events after separation, in particular, her residence in (country omitted), her financial circumstances during the post separation period, her responsibility for 3 children without assistance from the Husband, and her understanding that the parties would have to, at some stage, sever their financial relationship, that she has provided a reasonable explanation for the delay. I find it noteworthy too, that neither party refers to whether he/she had been made aware of the limitation period.
40. In relation to prejudice to the Husband, the Wife’s counsel submits that the Husband has not shown that he would suffer hardship if leave were granted. It has been open to the Husband since the time of the parties’ separation to bring proceedings to finalise the parties’ financial relationship. Even on his own evidence he has always known an adjustment will need to be made. When, in 2014, he wanted to resolve the property and parenting issues, he proposed starting proceedings in this Court. The Husband has not changed his circumstances since separation. He has continued to pay the mortgage and continued to live in the former matrimonial home. He has not reorganised his financial or personal affairs on the reasonable expectation that no application would be made. I agree with counsel’s submissions on this issue.
41. In relation to each party’s financial position, both parties must meet substantial legal costs whether leave is granted or not. I am not persuaded either party is in a strong financial position. The Wife deposes to renting a property from a friend who is temporarily charging considerably less than market rate. She deposes to being unable to afford the cost of the extracurricular activities, including music tuition, swimming and tennis lessons. She says Z needs braces. She needs to repay her mother who is on a pension in (country omitted). The older Children need professional driving lessons and additional tuition for the HSC. The Wife believes that if she is not permitted to claim her just and equitable entitlement based on an overall assessment of each party’s contributions, the Children will miss out, and it will take much longer for her to be in a position to purchase a home.
42. I find that both parties are in a difficult financial position. However, the Wife has the care of the parties’ three Children and carries the whole responsibility for their physical and emotional care. While the Husband is paying child support, the Wife depends on her husband (who has modest earnings) and her mother to meet most of the household expenses, including expenses for the Children.
43. There is no dispute that the parties will sever their financial relationship and that each party will be entitled to a share of the Property A property. I am satisfied the Wife has made significant contributions during the marriage, particularly in relation to the welfare of the Children, and that since separation, she has carried the whole of the responsibility for the parties’ three Children without assistance from the Husband until late 2014, when he re-commenced paying child support. While I cannot predict what each party’s entitlement will be, I am persuaded in all the circumstances that it is just and reasonable for leave to be granted to the Wife. I have ordered accordingly.

44. The parties will notify the Supreme Court of this Court’s decision. The parties will obtain a joint valuation of the Property A property and share equally the costs. The parties will exchange Superannuation Information Forms to verify their entitlements to superannuation. The parties will then prepare a balance sheet. The matter will then be returnable before me. It is likely the parties will then be referred to a conciliation conference for attempts to be made to resolve the matter.