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May 2, 2016

Leave for property settlement out of time

Proctor & Proctor [2016] FCCA 613 (23 March 2016)

The following is annotated. For full case: http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCCA/2016/613.html?stem=0&synonyms=0&query=family%20law%20act

Leave to apply out of time

In an earlier decision of Holden & Holden^[246]I had received detailed submissions as to the case law to guide a determination of leave. I adopt and incorporate paragraph 163 of that decision to repeat the case law applicable to the issue:
163. In dealing with the substantive issue of leave I am greatly assisted by the decisions referred to above and which have been highlighted by Counsel in their closing submissions. To that end I incorporate paragraphs 145 – 163 (inclusive) of the decision in Tamaniego [2010] FamCAFC 254 as well as paragraphs 25 – (27) inclusive) of Riordan [2012] FMCAfam 1297 together with paragraphs 6 – 14 of Morgan & Flanagan [2014] FamCA 248 all of which are set out below and all of which, I am satisfied, provide a clear and concise identification of the matters which I must address in determining these proceedings.

Tamaniego & Tamaniego [2010] FamCAFC 254

Institution of proceedings out of time

145. In relation to the approach to be taken to the determination of an application pursuant to s 44 of the Act for leave to institute proceedings for property settlement pursuant to s 79, subject to some additional observations, I will repeat some of what I said in Oxenham & Oxenham [2009] FamCAFC 167 (15 September 2009).

146. Section 44(1) of the Act provides that proceedings under the Act shall be instituted by application. Section 44(2) provides that a respondent may, in an answer to an application, include an application for any decree or declaration under the Act.

147. Section 44(3) of the Act provides:

Where, whether before or after the commencement of section 21 of the Family Law Amendment Act 1983:

(a) a divorce order has taken effect; or

(b) a decree of nullity of marriage has been made;

proceedings of a kind referred to in paragraph (c), (caa), (ca) or (cb) of the definition of matrimonial cause in subsection 4(1) (not being proceedings under section 78 and 79A or proceedings seeking the discharge, suspension, revival or variation of an order previously made in proceedings with respect to the maintenance of a party) shall not be instituted, except by leave of the court in which the proceedings are to be instituted or with the consent of both of the parties to the marriage, after the expiration of 12 months after:

(c) in a case referred to in paragraph (a)–the date on which the divorce order took effect; or

(d) in a case referred to in paragraph (b)–the date of the making of the decree.

The court may grant such leave at any time, even if the proceedings have already been instituted.

148. Section 44(4) of the Act provides:

The court shall not grant leave under subsection (3) or (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; or

(b) in the case of proceedings in relation to the maintenance of a party to a marriage–that, at the end of the period within which the proceedings could have been instituted without the leave of the court, the circumstances of the applicant were such that the applicant would have been unable to support himself or herself without an income tested pension, allowance or benefit.

149. Proceedings of a kind referred to in paragraph (ca) of the definition of “matrimonial cause” in s 4(1) of the Act are “proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them”.

150. As to the procedure to be adopted in hearing an application under s 44(3) of the Act, in Whitford and Whitford the Full Court observed at 78,143:

The hearing of an application for leave to institute proceedings under sec. 44(3) is not intended to be the final hearing of a matter. We do not consider it necessary or desirable to lay down any definitive procedural rules for the conduct of such an application. Generally, the applicant should file adequate affidavit evidence from which the facts appertaining to the relevant issues appear. The respondent should have an opportunity to file an affidavit to answer the applicant’s allegations and to adduce material showing why leave to institute the proceedings should not be granted. In appropriate cases, the applicant should have an opportunity to file an affidavit in reply. Cross-examination of either party on his or her affidavit material should be permitted, and there may be occasions, when some oral evidence supplementing the affidavit evidence might be received. If the Court considers it necessary, it may allow an applicant to conduct some investigation into the financial position of the respondent. The parties and the judge hearing the matter will no doubt bear in mind that the only question to be determined is, whether leave should be granted enabling the applicant to institute proceedings, and the extent of the proceedings and any investigation should be regulated accordingly.

The procedure to be adopted was summarised by Boland J in Hedley & Hedley [2009] FamCAFC 179; (2009) FLC 93-413 (per Finn, Boland and Cronin JJ) at 83,676.

151. In Neocleous and Neocleous Fogarty and Nygh JJ observed at 79,914 that: “It has also long been recognised that a hearing of an application under s.44(3) should be summary in character”. Their Honours also observed:

As we see it, the essence of the remarks in Whitford as further exemplified by decisions such as Jacenko, is that the judge must always bear in mind that the only question to be determined is whether leave should be granted to enable proceedings to be instituted and this should govern the procedure before him or her. For that reason it will often be undesirable to allow cross-examination on any issue which will or can be fully litigated at the principal hearing or on any issue which is not immediately relevant to the question of granting leave.

152. In Neocleous and Neocleous, Lindenmayer J observed at 79,917 that it was not necessary for the applicant to be cross-examined about matters going to a prima facie case, but in his view, the trial Judge’s refusal to allow a cross-examination on other issues of delay and hardship, was a denial of natural justice.

153. Although s 44 of the Act does not state what principles should guide the exercise of the discretion to grant or refuse leave to extend time, the discretion is not wholly unfettered. As the Full Court observed in Whitford and Whitford at 78,144 “two broad questions may arise for determination”. First, the discretion is subject to the requirement in s 44(4)(a) of the Act that the court must not grant leave unless it is satisfied that hardship would be caused to a party to the relevant marriage or a child if leave were not granted. Thus, if such hardship is not established then the application for leave must be dismissed. Second, if the court is satisfied that hardship would be caused, it should proceed to consider whether leave should be granted or refused: see also Hall and Hall and Cox and Cox (1981) FLC 91-068.

154. In summary, there are two questions that have to be considered and the applicant for leave bears the onus on the balance of probabilities. As the Full Court also observed in Whitford and Whitford at 78,145:

If the Court is satisfied that hardship would be caused if leave were not granted, the Court may exercise the discretion which is conferred upon it by sec. 44(3) to grant leave or it may refuse such leave. Section 44(4) inhibits the granting of leave unless the requisite case is made out, but it does not provide that leave must be granted if the Court is satisfied that hardship would be caused.

155. In relation to the first question, as to what constitutes hardship, there is considerable authority. In Whitford and Whitford the Full Court said at 78,144:

The hardship referred to in sec. 44(4) is the hardship which would be caused to the applicant or a child of the marriage if leave were not granted. The loss of the right to institute proceedings is not the hardship, to which the subsection refers. It is with the consequences of the loss of that right, with which the subsection is concerned. The requirement, that the Court must be satisfied that hardship would 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 were 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. Further, the matter with which the Court is concerned is not whether the applicant or a child is suffering hardship, but the question is whether the applicant or a child would suffer hardship if leave were not granted. If the probable result of the hearing on the merits is that the hardship is not likely to be alleviated, then the Court cannot be satisfied that the applicant or a child would suffer hardship if leave were not granted.

156. In Whitford and Whitford the Full Court went on to consider what the word “hardship” in s 44(4) means and observed at 78,144: “In our view the meaning of ‘hardship’ in subsec. 44(4) is akin to such concepts as hardness, severity, privation, that which is hard to bear or a substantial detriment”. The Full Court then observed at 78,145:

In ordinary parlance, hardship means something more burdensome than “any appreciable detriment”. We consider that in subsec. 44(4) the word should have its usual, though not necessarily its most stringent, connotations. It is impossible to lay down in advance what particular facts may or may not amount to hardship in the relevant sense. As a general proposition it might be said that, the inability of an applicant to pursue a claim which in the circumstances of the applicant or a child of the marriage is trifling, generally will not cause hardship. Similarly, where the costs which the applicant will have to bear himself or herself are about as much or more than what the applicant is likely to be awarded on a property claim, ordinarily hardship would not result if leave to institute proceedings were not granted. But otherwise we find no warrant in either subsec. 44(3) or 44(4) for saying that the right or entitlement lost must be a substantial one. (emphasis in original)

157. In Whitford and Whitford the Full Court observed at 78,145: “In an appropriate case, and depending on the circumstances of the applicant or the children, hardship may be caused by the loss or deprivation of something which is of comparatively small money value”. Further, the Full Court observed that the applicant may establish hardship although the applicant is not in poor or necessitous circumstances: see Frost and Nicholson at 76,423. However, the inquiry is not concerned per se with whether the applicant for leave may be suffering hardship. Hardship is not established by showing that the applicant would be marginally better off if leave were granted.

158. In Hall and Hall the Full Court (per Evatt CJ, Fogarty and Yuill JJ) said at 78,627-28:

The case[s] … have considered what is meant by the term “hardship” in this context, and the term “substantial detriment” seems to be the generally accepted interpretation of that word.

Fundamental to that is a determination of the quality or character of the potential claim. In relation to that different cases have used somewhat different phrases to describe it so that it has become something of a matter of semantics to describe in different ways what is really the same basic concept. For example in Swallow’s case (unreported Emery J., 16 September 1977; referred to in McDonald’s case) it was said to be “a prima facie case which is in the circumstances substantial”; the Full Court in McDonald’s case differed from that by stating that it ought to be “a reasonable prima facie case”. In Mackenzie’s case it was described as being “a probability of success”, and in Whitford’s case the distinction was said to be that the applicant would need to show that she would “probably succeed” to be contrasted with a situation where she had “no real probability of success”. In Perkins’ case (1979) FLC 90-600 Lindenmayer J. described it as “a reasonable probability of the claim being successful in some measure”.

These varying phrases may tend to suggest different shades of meaning whereas in reality they are directed to the same fundamental inquiry which basically is in the context whether on the applicant’s material he or she has a reasonable claim to be heard by the court. It is not necessary to further categorize the nature or quality of that claim, subject, however, to the qualification referred to by Lindenmayer J. in Perkins’ case at p. 78,054 when he said:

I would add only this qualification, that if the applicant’s evidence as to merits of his or her proposed claim is in itself inherently improbable or self contradictory in important respects, or if it is clearly shown by other impeachable evidence (such as undisputed documentary evidence or the testimony of independent witnesses) to be false, then the applicant may be held to have failed to establish a prima facie case notwithstanding that if his or her evidence were accepted there would be a reasonable probability of success.

As Lindenmayer J. said, an application under sec. 44 is not intended to be a detailed hearing of the merits of the proposed claim itself. In Whitford’s case the Full Court also referred to this and indicated the sort of procedure that would generally be involved on such an application (see p. 78,143). It is not a proceeding to determine whether and to what extent the proposed application will ultimately be successful. It is a procedure to determine whether the applicant would suffer hardship if leave were not granted and whether otherwise it is appropriate to grant leave.

Similarly it needs to be borne in mind that the prospect of success need not relate to the whole of the proposed claim. It is sufficient if it relates to some part or aspect of it which in the context of the facts of the individual case is of significance.

It is therefore an inquiry as to whether in the particular circumstances of the case in question the applicant would suffer hardship by the refusal to grant leave which sec. 44(4)permits the court to grant. As all of the authorities point out, the fact that the applicant demonstrates that he or she has a reasonable claim to present to the court is not necessarily the same thing, although that is an important aspect of the matter. That circumstance must then be considered in the light of all of the facts in determining whether at this particular stage the applicant would suffer hardship by the application being refused. That involves amongst other matters some consideration of the then financial and other circumstances of both parties.

If hardship of the required type is established then the court may grant the leave but it has a discretion to refuse to do so and in considering the exercise of that discretion it would take into account any other relevant matters, but basically the question whether there is a reasonable explanation of the delay and the question of prejudice which may have occurred to the respondent as a consequence. Other facts may be relevant in an individual case, such as, for example, any prior order or provision made, and the discretion has to be exercised on the basis of the facts of that particular case. (italics in original)

159. In Frost and Nicholson Nygh J said at 76,424:

I have already indicated my view that had she brought action in time she would have been entitled to a substantive order even if falling short of 50 per cent of the joint assets. To deprive a party of a right to institute proceedings is not per se hardship, but to deprive the wife of a right to action in the present circumstances is to work an injustice, and that is a “substantial detriment”. As the Full Court said in Hall and Hall (1979) FLC 90-679, at p. 78,627, fundamental to the enquiry as to hardship is the question whether the applicant has a reasonable claim to be heard by the court. That is not by itself necessarily the same thing as hardship, but the stronger the applicant’s prima facie claim, the greater the likelihood of hardship if leave were refused. The issue depends on the circumstances of each case, as Strauss J. so aptly pointed out in Mackenzie and Mackenzie (supra). (italics in original)

See also Althaus and Althaus (1982) FLC 91-233 at 77,267 per Evatt CJ.

160. In summary, in order to establish hardship in the relevant sense, the applicant for leave must have a prima facie case to be heard by the court on the merits. This does not require a detailed hearing of the merits of the substantive application, but a consideration of whether there exists a prima facie case on the strength of the applicant’s material.

161. I observe that Dr Anthony Dickey in Family Law (Thomson Lawbook, 5th edition, 2006) observed at page 633:

What constitutes a “substantial detriment” depends upon the circumstances of each case. In many cases the substantial detriment is the inability of a spouse to pursue a claim for maintenance or an alteration or property interests where the resulting loss is significant in the light of his or her financial circumstances. The detriment need not, however, be exclusively financial (citations omitted).

162. As to the second part of the exercise, the fundamental issue in any application for extension of time is whether this will enable the court to do justice between the parties: see Gallo v Dawson [1990] HCA 30; (1990) 93 ALR 479. In Gallo v Dawson McHugh J referred to the need to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation and the consequences to the parties of the grant or the refusal of the extension of time. The authorities and principles were discussed in Tormsen and Tormsen (1993) FLC 92-392: see also McMahon and McMahon (1976) FLC 90-038; Van der Kreek and Van der Kreek (1978) FLC 90-421 and Coombs and More (1990) FLC 92-175. In summary, in considering the second question the court may have regard to a number of factors that include whether the applicant has an adequate explanation for the delay in bringing the proceedings and whether to grant leave would prejudice or impose hardship on the respondent to the application for leave or other persons.

163. Dr Anthony Dickey in Family Law at page 634 set out a useful summary of various considerations that a court may take into account when exercising the discretion to grant or refuse leave including “the strength of the applicant’s case”. Dr Dickey observed:

164. The decision whether to grant leave under s 44(3) ultimately involves a weighing of two competing principles. The first is that spouses should ordinarily commence any proceedings for spousal maintenance or alteration of property interests within 12 months of the date of the divorce or the annulment of their marriage, or within 12 months of their financial agreement or approved maintenance agreement seeking to have effect if this is later. The second is the clear intention evinced by s 44(4) that proceedings for such relief should nonetheless be permitted out of time in order to avoid hardship to a spouse or a child. (citations omitted)

See also Whitford and Whitford at 78,146.

Riordan & Riordan [2012] FMCAfam 1297

25. Section 44(4) of the Act provides two alternative conditions without one of which, leave to institute the proceedings under subsection (3) cannot be given. Section 44(4) states:

“(4) The court shall not grant leave under subsection (3) or (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; or

26. Section 44(4) makes it a preliminary hurdle for the granting of leave that hardship (or the limited alternative referred to above in the case of maintenance) must be proved. The proof of hardship (or the limited alternative referred to above) is therefore necessary for the success of an application under s.44 of the Act. Upon proof of hardship, the Court is required to consider whether the leave should or should not be granted. It is an exercise of discretion.

27. In Whitford and Whitford (1979) FLC 90-612 at p.78,144 the Full Court of the Family Court of Australia stated:

“[O]n an application for leave under sec 44(3), two broad questions may arise for determination. The first of these is whether the Court is satisfied that hardship would be caused to the applicant or a child of the marriage if leave were not granted. If the Court is not so satisfied, that is the end of the matter. If the Court is so satisfied, the second question arises. That is whether in the exercise of its discretion the Court should grant or refuse leave to institute proceedings.”

Morgan & Flanagan [2014] FamCA 248

6. Sections 44(3) and (4) of the Family Law Act 1975 (Cth), in summary, provide that such proceedings cannot be commenced without leave of the Court after the expiration of 12 months after a divorce order takes effect.

7. The Court may grant leave at any time, even if the proceedings have already been instituted, however, such leave shall not be granted unless the court is satisfied that hardship would be caused to a party to the relevant marriage or a child if leave were not granted.

8. In Whitford & Whitford (1979) FLC 90-612 the Full Court held:

[O]n an application for leave under s 44(3), two broad questions may arise for determination. The first of these is whether the Court is satisfied that hardship would be caused to the applicant or a child of the marriage if leave were not granted. If the Court is not so satisfied, that is the end of the matter. If the Court is so satisfied, the second question arises. That is whether in the exercise of its discretion the Court should grant or refuse leave to institute proceedings…

9. Hardship in the context of the wife’s application means substantial detriment (Hall & Hall (1979) FLC 90-679) and the Court will consider a number of factors:

a. whether on the Applicant’s evidence she has a reasonable case to be heard;

b. the financial and other circumstances of both of the parties; and

c. any other facts of the case relevant to the issue of hardship.

10. After considering the question of hardship, the question to be determined is whether the Court should, in the exercise of its discretion, grant or refuse leave to bring proceedings out of time. Pertinent considerations are:

i. the length of the delay in bringing proceedings;

ii. whether there has been a reasonable explanation for the delay;

c. the prejudice that may be caused to a respondent to the application if permission is granted; and

d. any other facts of the case relevant to the exercise of the Court’s discretion.

11. The absence of any reasonable or other explanation for delay in commencing proceedings is no more than one of the relevant considerations. The absence of an explanation does not mean that leave will not be granted (Neocleous [1993] FamCA 44; (1993) FLC 92-377; Carlon & Carlon (1982) FLC 91-272).

12. As the Full Court said in Whitford (supra), having regard to the nature of the jurisdiction which the Court exercises, the power to extend time should be exercised liberally in order to avoid hardship but, nevertheless, in a manner which would not render nugatory the requirement that proceedings should be instituted within a year from the divorce decree.

13. Pursuant to s 81 of the Act the Court has a duty to end the financial relationship of parties to a marriage as far as practicable, and to therefore make such orders to finally determine the financial relationship between parties to a marriage and avoid further proceedings between them where possible. But this is to be balanced against the Court’s power to grant leave to institute proceedings out of time if it is satisfied that not to do so would cause a party to a marriage financial hardship, as referred to above.

14. The questions for determination are:

a. Whether the wife has demonstrated hardship as contemplated by the statutory provision?

b. If hardship is demonstrated then should leave be granted for the wife to commence proceedings for property and/or spousal maintenance out of time?

By reference to the above authorities it is clear that I must address the following questions:
1. Does the wife have a prima facie case being a reasonable claim that requires hearing?
2. Would the wife suffer hardship if leave were not granted?
1. What is the wife’s explanation of delay?
1. Is there hardship and prejudice to the husband if leave is granted?
I propose to deal with each consideration separately.

Does the wife have a prima facie case being a reasonable claim that requires hearing?

I am satisfied that Ms Proctor has an abundantly reasonable claim that requires hearing.
Whilst Mr Proctor’s Affidavit material denied any significant contribution by Ms Proctor, his concessions during his oral testimony in chief and during his cross-examination are certainly sufficient to warrant the admission of her claim.
It is conceded that Ms Proctor was, for some years, the sole income owner for the household and supported all within that home and met the payments which preserved the home.
It is conceded that for some years and until the 2000s that Ms Proctor undertook and attended to substantial responsibilities within the home as both a homemaker and parent (even though Mr Proctor describes her performance of those duties as neglectful).

Would the wife suffer hardship if leave were not granted?

I am satisfied that the wife would suffer substantial hardship if leave were not granted. The only significant assets of the relationship were two parcels of real estate, one in Property M (sold much earlier in the relationship but as to which there has been no accounting whatsoever by Mr Proctor – simply the assertion by him that those monies were expended on travel and household bills) and the home in which the parties lived for many years at Property C.
Mr Proctor was the sole registered proprietor of each of the above parcels of real estate. Without leave to commence proceedings Ms Proctor would have no right, claim or entitlement with respect to the proceeds of sale of either property and would thus be left with the frugal and modest personalty in her possession together with modest and unsplittable superannuation entitlements. Those items comprise approximately 10% of the total property available let alone what may be available.
To compound the above difficulties, I note Ms Proctor’s evidence that the Divorce, in which she was the Applicant in 1994, was a sham or a fraud upon the Court. I accept Ms Proctor’s evidence in this regard.
As a matter of equitable principle one is required to “come to equity with clean hands”. In those circumstances and noting Ms Proctor’s evidence that:
1. The “idea” of the Divorce was Mr Proctor’s idea and advanced for the purpose of financial enrichment of both through claims of Centrelink benefits;
2. Ms Proctor had only relatively recently arrived in the country from (country omitted) and might be described, without intending to be pejorative of her, as somewhat naive and gullible;
1. At the time the Divorce proceeded the parties were not separated and had not separated (indeed, Mr Proctor’s evidence is that the parties have not been separated 12 months);
1. Substantial coercive and controlling family violence permeated the relationship from its commencement; and
2. The clear knowledge of Mr Proctor with respect to the above;
I am satisfied that Ms Proctor should not be disqualified from seeking leave nor barred from relying upon the above evidence by reference to the “Elias principle”.^[247]
I am also satisfied by reference to the above that leave should be granted to Ms Proctor to commence proceedings pursuant to section 44(3) of the Family Law Act 1975 , thus authorising Part VIII proceedings as a matrimonial cause rather than leave being granted pursuant to section 44(6) which would authorise Part VIIIAB proceedings.
Irrespective of which part of the Act is used as the basis for jurisdiction, I am satisfied that leave should be granted. I have determined that leave should be granted to authorise Part VIIIproceedings as the parties had been married, any suggested separation (although upon an acceptance of Ms Proctor’s evidence I do not accept that one had occurred at the time of the Divorce) was very brief and the nature and effect of the parties relationship and cohabitation has, in reality, been a continuum of the marriage initially entered into between these parties.

What is the wife’s explanation of delay?

The wife has provided an abundant explanation of delay. This has included a consideration of:
1. The suggested reality, on the wife’s case, that the parties had not separated at the time of the Divorce;
2. The occurrence of substantial family violence throughout the relationship;
1. The relatively continuous cohabitation of these parties including, on the wife’s evidence which I accept, they not having separated prior to the Divorce and having only separated for brief periods before their final separation during 2011 (as to which date both parties agree); and
1. The birth of three of the four children of the relationship following the Divorce of these parties and their clear reconciliation if, in fact, they had ever separated.

Is there hardship and prejudice to the husband if leave is granted?

I am not satisfied that there would be hardship and prejudice to Mr Proctor such as to obviate against leave being granted.
In closing submissions Mr Proctor proposed, subject to the payment of certain debts, that an equal division of the remaining proceeds of sale ($144,000 held in a trust account) should occur.
Whilst Mr Proctor is self-represented he is not an unsophisticated litigant. I do not rely solely upon the position advanced by Mr Proctor in rejecting the occurrence of hardship and prejudice. However, any hardship or prejudice that Mr Proctor might suffer, (bearing in mind that absent leave and as the sole registered proprietor of the property the proceeds of sale, which are the only substantial asset available for division, would be retained by Mr Proctor and Ms Proctor would receive nothing), is outweighed by the clear hardship that Ms Proctor would suffer if leave were refused.
In light of the above matters I propose to grant leave to Ms Proctor to continue her claim for property relief.

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