BEAL & FLORES
[2019] FCCA 2177
•16 August 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BEAL & FLORES | [2019] FCCA 2177 |
| Catchwords: FAMILY LAW – De facto property proceedings – application to proceed out of time – matters to be considered – balance of hardship – prima facie case – explanation for delay – leave to proceed granted. |
| Legislation: Family Law Act 1975 (Cth), ss.4, 4AA(1), 39, 44(5), 44(6), 90RD, 90SF(3), 90SM |
| Cases cited: Bevan & Bevan [2013] FamCAFC 116 |
| Applicant: | MS BEAL |
| Respondent: | MR FLORES |
| File Number: | ADC 4347 of 2018 |
| Judgment of: | Judge Brown |
| Hearing date: | 18 June 2019 |
| Date of Last Submission: | 18 June 2019 |
| Delivered at: | Adelaide |
| Delivered on: | 16 August 2019 |
REPRESENTATION
| Counsel for the Applicant: | Ms Horvat |
| Solicitors for the Applicant: | Andersons Solicitors |
| Counsel for the Respondent: | Ms Angell |
| Solicitors for the Respondent: | Rebecca Boreham |
ORDERS
Pursuant to section 44(6) of the Family Law Act 1975 the applicant is granted leave to proceed with his application for settlement of de facto property out of time.
The parties and their legal representatives do attend a conciliation conference with a registrar of the court on 11 October 2019 at 9:15am.
Unless otherwise exempted from payment the Applicant must pay the Conciliation Conference fee in accordance with the Family Law (Fees) Regulation 2012 twenty eight (28) days prior to the Conciliation Conference.
No later than 13 September 2019 the parties exchange informal discovery of all relevant documents as specified in Order 24 Rule 4 of the Federal Circuit Court Rules.
Further consideration of the matter is adjourned to 23 October 2019 at 9:30am for further directions in the court’s circuit to Broken Hill.
IT IS NOTED that publication of this judgment under the pseudonym Beal & Flores is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BROKEN HILL |
ADC 4347 of 2018
| MS BEAL |
Applicant
And
| MR FLORES |
Respondent
REASONS FOR JUDGMENT
Introduction
The parties to these proceedings are Ms Beal and Mr Flores. They have never been married. They are the parents of X, born … 2012 and Y born … 2014.
Ms Beal is employed as public servant, on a part-time basis, at a preschool in Town B. She earns approximately $20,000.00 per annum and receives an amount of child support, for the children, from Mr Flores.
The amount of child support is assessed pursuant to a statutory formula, which takes into account the respective incomes of the parents concerned and the care arrangements for the children. The formula is designed to be responsive to changes in the financial circumstances of the parties concerned.
Mr Flores is a tradesman, currently employed at Employer G, Town B. In the past, during the parties’ relationship, he worked on a fly in/fly out basis earning a good living. His current income is approximately $115,000.00 per annum.
The parties met, in Town B, in … of 2011, and began a serious relationship shortly afterwards. In … 2012, Ms Beal moved into a house owned by Mr Flores at A Street, Town B. At this stage, axiomatically, the parties were expecting their first child. It would seem not to be an unreasonable inference that they mutually wished to be in a position to provide a secure home for their impending child.
At any rate, in this context, there is no controversy arising between the parties that, by … 2012, if not before, they were in a de facto relationship, as defined by section 4AA(1) of the Family Law Act 1975.[1]
[1] Hereinafter referred to as “the Act”
The parties disagree about the precise date on which the relationship between them came to an end. Mr Flores places it in February 2016, when there was a disagreement between him and Ms Beal regarding the behaviour of Ms Beal’s child from an earlier relationship. This child is Ms H born … 1999.
Ms Beal places the end of the parties’ relationship in April of 2016. Whatever is the relevant date, it is agreed between Mr Flores and Ms Beal that they remained living under the same roof, at the A Street, Town B property, until May of 2016, when Ms Beal moved out with Ms H, X and Y.
The parties are extremely critical of one another, in their respective affidavit material. It is Ms Beal’s evidence that she was subject to coercive and controlling behaviour, emanating from Mr Flores, during the parties’ relationship.
In particular, she alleges that she was subject to frequent incidents of verbal abuse and her access to the family’s finances was restricted by Mr Flores. She further claims that she was on occasions pushed by Mr Flores and on one occasion subjected to sexual assault.
Mr Flores denies these allegations. To the contrary, it is his position that Ms Beal was verbally abusive and emotionally labile towards him, during the parties’ relationship. He alleges that she assaulted him on at least three occasions.
He asserts that he attempted to remain in the relationship, for the sake of the children, until Ms Beal’s continued unpredictable conduct forced him to the conclusion that it was better, for all concerned, if it was ended.
There are similar controversies arising between the parties regarding the discharge of home duties and parenting responsibilities during their relationship. It is Mr Flores’ position that Ms Beal was a lax housekeeper and he performed a significant proportion of homemaking duties and provided a significant level of care for the children, notwithstanding Ms Beal’s irrational criticism of his parenting capabilities.
On the other hand, it is Ms Beal’s position that Mr Flores was frequently absent from the household due to his fly in/fly out roster and when he was home he abused alcohol to a significant degree. In these circumstances, it is her position that the vast majority of all parenting and homemaking responsibilities fell onto her shoulders.
All in all, from each party’s perspective, the relationship between them was deeply unhappy and unsatisfying. I am not in a position to resolve these significant factual issues, at this stage.
Rather, the controversy towards which these reasons for judgment are directed is whether Ms Beal should be given leave to proceed with an application brought by her to settle issues of de facto relationship property between the parties, which is out of time.
Background
In the immediate post-separation period (from mid-2016 onwards) the parties were able to agree on informal arrangements for Mr Flores to spend time with X and Y, during his days off from work. It was agreed that the children would spend one overnight period with their father.
In August/September of 2016, the parties attended at Relationships Australia, in Town B, in an attempt to agree on and formalise further arrangements in this regard. In this context, the parties agree that they moved to a regime whereby the children would spend around two consecutive nights, in their father’s care, during his weeks off.
Again, the parties disagree vehemently regarding the efficacy of this regime. From the father’s perspective, it worked reasonably well and he had regular extended periods of time with the children. He was anxious to have more time with the children.
On the other hand, it is the mother’s position that the children struggled with this arrangement and ultimately she came to the conclusion that it was not in their best interests and needed to be changed, with the father’s time with the children scaled back.
It was against this background that Ms Beal commenced proceedings, in this court, on 19 October 2018. This was approximately 30 months after Ms Beal and the children had moved out of the A Street, Town B property.
As previously indicated, during this period, the parties had been engaged in a process of mediation regarding children’s issues. It is also Mr Flores’ position that he and Ms Beal engaged in some significant discussions regarding financial issues between the two of them. In this context, he provided significant sums of money to Ms Beal, as well as a motor vehicle.
In her application, Ms Beal seeks the following orders:
·Property referable to the parties’ de facto relationship be divided 60/40 in Mr Flores’ favour;
·The parties’ respective superannuation interests, accumulated during their de facto relationship, be equalised;
·X and Y live with her; and
·Specific orders be made defining the time which the children are to spend with their father during school time, holidays and on special occasions.
By way of interim or procedural orders, Ms Beal seeks the following orders:
·She be granted leave, pursuant to section 44(6) of the Family Law Act 1975 to institute her proceedings for de facto property settlement;
·The parties exchange informal discovery and any relevant asset be valued; and
·The parties engage in a process of conciliation.
More recently again, Ms Beal has amended her application (28 March 2019) and has raised the issue of her relocation with the children out of Town B. She seeks to move with X and Y, to South Australia, at the end of the 2020 school year.
In his response filed on 17 February 2019, Mr Flores seeks the following orders:
·Ms Beal’s application for settlement of de facto property be dismissed. Necessarily, he opposes the application for an extension of time;
·X and Y live with their mother;
·He spend a defined period of time with the children (of greater duration than that proposed by the mother) during school terms, school holidays and on special occasions; and
·It is implicit in the orders proposed by Mr Flores that he opposes the children’s relocation out of Town B.
In general terms, it is Mr Flores’ position that moneys and assets previously advanced by him to Ms Beal represented a just and equitable settlement of property issues between the parties and Ms Beal herself was aware that a time limit applied to any potential application to the court for such a property settlement.
In summary, it is Mr Flores’ position that Ms Beal has not established that she has a prima facie case for a de facto property settlement in all the circumstances of the case. These reasons for judgment are directed towards the resolution of this threshold issue.
Applicable legal provisions
Pursuant to section 39 of the Act, this court has jurisdiction conferred upon it in respect of what are termed de facto financial causes. This expression is defined by section 4, to include proceedings in respect of the distribution, after the breakdown of the de facto relationship, of the property of the parties or either of them.
Part VIIIAB of the Act deals with financial matters relating to de facto relationships. In particular, pursuant to section 90RD, the court has authority to make a declaration about the existence of a de facto relationship, including when that relationship ended and pursuant to section 90SM, the authority to alter the proprietary interests of the parties to a de facto relationship, after the breakdown of that relationship.
However, time limits are imposed in respect of such applications. Pursuant to section 44(5) subject to subsection (6), a party to a de facto relationship may apply for an order under section 90SM only if:
“…the application is made within the period (the standard application period) of…2 years after the end of the de facto relationship.”
However, pursuant to section 44(6):
“(6) The court may grant the party leave to apply after the end of the standard application period if the court is satisfied that:
(a)hardship would be caused to the party or a child if leave were not granted; or
(b)in the case of an application for an order for the maintenance of the party—the party’s circumstances were, at the end of the standard application period, such that he or she would have been unable to support himself or herself without an income tested pension, allowance or benefit.”
The definition of de facto relationship is defined in section 4AA(1) of the Act as follows:
“(1) A person is in a de facto relationship with another person if:
(a) the persons are not legally married to each other; and
(b)the persons are not related by family (see subsection (6)); and
(c)having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.”
Section 4AA(2) is prefaced by the heading “Working out if persons have a relationship as a couple”. Thereafter the following circumstances are delineated, which may denote the existence of such a relationship. The list provided is not exhaustive and the factors in it are not specifically noted to be directive. They are as follows:
“(a) the duration of the relationship;
(b)the nature and extent of their common residence;
(c)whether a sexual relationship exists;
(d)the degree of financial dependence or interdependence, and any arrangements for financial support, between them;
(e)the ownership, use and acquisition of their property;
(f)the degree of mutual commitment to a shared life;
(g)whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;
(h)the care and support of children;
(i)the reputation and public aspects of the relationship.”
Section 4AA(3) & (4) provide, in effect, that no particular finding is to be regarded as necessary or definitive before the court finds that a de facto relationship exists in the specific case with which it is concerned. Rather the court may have regard to the matters and attach weight to those matters as it considers appropriate to do so.
As such, the list of matters contained in section 4AA(2) is not to be regarded as some sort of checklist. Rather it is a guide. The court is required to apply individualised justice to the idiosyncratic circumstances of each particular case coming before.
Given the uncontroverted facts in this case, namely the fact that the parties lived together, for a number of years, at the A Street, Town B property and it was not only their home but the home of their two children, who were born during the period the parties occupied this property, there is no dispute that the parties were in a de facto relationship, for the purposes of the applicable legislation between at least March of 2012 and mid-2016.
Given the factual context of the dispute between the parties, it is necessary for me to briefly outline the legal principles, which the court must apply, when considering whether it is just and equitable to make an order dividing property relevant to a de facto relationship, between the parties to that relationship, after it has concluded.
This is necessary because of Mr Flores’ position that there has, in effect, been an appropriate distribution of property to Ms Beal and therefore it is axiomatic that she has suffered no hardship, as envisaged by section 44(6)(a).
These provisions contained in section 90SM are analogous to the provisions applicable to matters relating to the division of property and spousal maintenance of married individuals contained in Part VIII of the Act, particularly section 79. Accordingly, the same jurisprudence is applicable to both sets of provisions.
Pursuant to section 90SM(1) the court is authorised to make such order as it considers appropriate in order to alter the interest of the parties to a de facto relationship in relevant property.
The expression “property” is defined in section 4(1) in relation to the parties to a marriage or either of them as meaning “…property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.”
Pursuant to section 90SM(3) the court is actively prevented from making an order altering proprietorial interests, unless it is satisfied that it is just and equitable to do so in all the circumstances prevailing. This follows from the use of the prohibitive words “must not” in the relevant section.
Section 90SM(4) provides the mechanics of how a court is to make an order altering de facto property interests. It provides seven matters [in paragraphs (a) – (g)] to be considered, as relevant.
Paragraphs (a); (b); and (c) categorise contributions made by de facto partners, which are relevant. Paragraph (d) directs the court to take into account the effect of any order upon the earning capacity of either party to the de facto relationship concerned.
Paragraph (e) directs the court to consider a list of matters contained in section 90SF(3), which are germane to maintenance or the prospective positions of the parties concerned by reference to their respective financial resources, means and needs.
Finally, Paragraphs (f) and (g) apply to child support and previously made parenting orders, as relevant. There is some overlap between these various provisions and not all will be applicable in every case.
Until recently, the position in respect of the process to be applied to the resolution of both de facto and matrimonial property cases was said to be well-settled, as it required the application of a preferred approach. This approach entailed a four step process, described by the Full Court as follows:
· identification and valuation of the property of the parties;
· identification and evaluation of contributions to the property (including property no longer owned by the parties) – the contribution phase – section 90SM(4) (a) to (c) or section 79(4) (a) to (c);
· identification and assessment of the various matters in section 90SM(4) (d) to (g) or 79(4)(d) to (g) including to the extent they are relevant, the matters in either section 90SF(3) or 75(2), as applicable – the prospective needs phase; and
· considerations of justice and equity.[2]
[2] See Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 at 78,386 [39] and Bevan & Bevan [2013] FamCAFC 116 at [60]
Contributions arising pursuant to section 90SM(4)(a)(b) & (c) (the so-called second step) can be broadly categorised under two headings. The first kind is contributions to the property: financial contributions and non-financial contributions, made directly or indirectly, by or on behalf of a party to the de facto relationship to the acquisition, conservation or improvement of any of the property.
The second kind is contributions to the welfare of the family: in the words of the section, “the contribution made by a party to the de facto relationship to the welfare of the family constituted by the parties to the de facto relationship and any children of the de facto relationship, including any contribution made in the capacity of homemaker or parent.”[3]
[3] See Family Law Act s 90SM(4)(c)
Section 90SM(4)(e) mandates the court to have reference to the matters listed in section 90SF(3)(e) of the Family Law Act 1975. In the main the factors there listed deal with each of the parties’ prospective needs (the so-called third step).
Pursuant to section 90SF(3)(r), the court is entitled to take into account “any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account”. A number of Full Court authorities have utilised this provision to ensure that proper regard is had to a variety of considerations in order to ensure a just and equitable outcome in property proceedings.
The “overriding requirement” of section 90SM is that considerations of justice and equity should inform the process envisaged therein. The exercise I must undertake is not a “process of social engineering”[4] or of equalisation of assets or financial resources.
[4] See Waters & Jurek (1995) FLC 92-635
Considerations of this type inform the so-called fourth step, as well as providing the determination as to how the court should approach issues such as notional property. The court must make the orders it considers just and equitable.
The controversies arising, in this case, centre on the second and third steps of this process. In particular, Mr Flores relies on the fact that he brought the most significant items of property, into the parties’ relationship, at its outset, particularly in the form of the A Street, Town B property and another property which he owns exclusively, located at C Street, Town B.
In these circumstances, it is his submission that these contributions require special recognition.[5] In addition, it is his position that his other financial contributions, as the family’s main breadwinner during the relatively short relationship of the parties, were significantly greater than those of Ms Beal.
[5] See Pierce & Pierce (1999) FLC 92-844
On the other hand, it is Ms Beal’s position that her contributions, made as a parent and homemaker, were equally significant to those of Mr Flores. In particular, she would point to the fact that her contributions were frequently made when Mr Flores was away from the home.
In these circumstances, she contends that there is a real risk that the court may underestimate the potential value of her contributions, if it potentially places undue weight on Mr Flores’ undoubtedly superior financial contributions, both before and during the parties relationship, which she concedes cannot be regarded as a long one.
In addition, it is Ms Beal’s submission that the court, if leave is granted, will need to closely examine the prospective needs of the parties concerned. In this context, she contends that as the likely primary provider of care for two young children, the various section 90SF(3) factors greatly favour her.
In particular, she points to the fact that she is likely to be a part-time wage earner, in receipt of a modest annual salary; whilst, on the other hand, Mr Flores has the potential to earn a far greater annual income as a fly in/fly out worker.
In the context of prospective needs, Mr Flores points to other considerations, the chief of these being the fact that, as a PAYG taxpayer his annual salary will be readily ascertainable and so amenable to an appropriate assessment of child support. In addition, he points to the fact that Ms Beal has re-partnered and receives a significant level of financial support from her current partner.
More significantly, it is the submission of Mr Flores that, in all the circumstances of the case, it would not be just and equitable to make any order altering proprietary interests in the circumstances of this case because of the moneys and assets he has already transferred to Ms Beal following the parties’ separation.
It is his contention that these represent 17 percent of the potential asset pool, which the court is likely to calculate pursuant to the first step of the process and given the factual circumstances pertaining, it would not be just or fair for there to be any further distribution made in Ms Beal’s favour.
In this context, as previously indicated, Mr Flores submits that Ms Beal has not established a prima facie case for relief under the relevant provisions of the Act. In support of this submission, he relies on what are likely to be the costs to be incurred by each party in pursuing the action.
He asserts that Ms Beal will incur legal fees in excess of $30,000.00.[6] How this sum has been arrived at is uncertain to me. It appears to be a ball park figure calculated by reference to a completed trial. However Ms Angell, counsel for Mr Flores, submits that, on any view, the extent of prospective fees renders it still more inequitable that the case should proceed further.
[6] See Respondent’s written submissions at paragraph 11.
Essentially, she argues that given what she would categorise as a modest asset pool, which, in economic terms, is referable solely to the efforts of her client, particularly prior to the commencement of the parties’ relationship, Ms Beal is not likely to derive any significant financial benefit from the proceedings, when her costs are considered. Therefore the loss of the opportunity to pursue the case cannot represent a hardship to her.
On the other hand, it is Ms Beal’s contention that it would be patently unfair for her to receive only 17 percent of the relevant asset pool, given her parenting contributions and her very significant prospective needs. In this context, she asserts that her likely entitlements to a property settlement pursuant to the Act is somewhere in the vicinity of 40 percent.
However, prior to the court considering these matters definitively, it is necessary to determine whether it should give leave to Ms Beal to proceed with her application, given the time limit provided by section 44(5), it being clear that the standard application period of two years began to run in May of 2016.
The authorities are clear that limitation periods, imposed by the legislature, are not empty shibboleths. Their rationale is that it is in the interests of society, as a whole, that litigation between individuals be commenced within fixed and well understood temporal parameters so that once those parameters have been reached, all concerned can carry on with their lives in the certitude that they will not be subject to litigation in respect of events which occurred in their past.
In Brisbane South Regional Health Authority v Taylor McHugh J (with whom Dawson J agreed) pointed out that
“The discretion to extend time must be exercised in the context of the rationales for the existence of limitation periods. For nearly 400 years, the policy of the law has been to fix definite time limits (usually six but often three years) for prosecuting civil claims. The enactment of time limitations has been driven by the general perception that ‘[w]here there is delay the whole quality of justice deteriorates’.”[7]
[7] Brisbane South Regional Health Authority v Taylor [1996] 186 CLR 541 at 551
Later in the case, his Honour said as follows:
“A limitation period should not be seen therefore as an arbitrary cut off point unrelated to the demands of justice or the general welfare of society. It represents the legislature’s judgment that the welfare of society is best served by causes of action being litigated within the limitation period, notwithstanding that the enactment of that period may often result in a good cause of action being defeated. ... A limitation provision is the general rule; an extension provision is the exception to it. The extension provision is a legislative recognition that general conceptions of what justice requires in particular categories of cases may sometimes be overridden by the facts of an individual case.”
In the same case, Toohey and Gummow JJ said as follows:
“The discretion ... is to order an extension of the limitation period. It is a discretion to grant, not a discretion to refuse, and on well established principles an applicant must satisfy the court that grounds exist for exercising the discretion in his or her favour. There is an evidentiary onus on the prospective defendant to raise any consideration telling against the exercise of the discretion. But the ultimate onus of satisfying the court that time should be extended remains on the applicant.”
The Family Court has enumerated the individual considerations which inform the discretion to ameliorate the limitation period, in appropriate circumstances, where the interests of justice require that it be extended. Essentially, it is a discretion to be exercised judicially by identifying matters relevant to the discretion, in the particular case and weighing those matters against one another.[8] The discretion is to be exercised primarily within considerations of the hardship which would be occasioned to the relevant applicant.
[8] See Milas v GM Holden Limited [2015] FCCA 1311 per Judge Sullivan
In Whitford & Whitford the Full Court of the Family Court, in a case concerned with the twelve month limitation period arising as a consequence of section 44(3) and the granting of a divorce order, stipulated that this “… power 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 decree nisi.” [9]
[9] See Whitford & Whitford (1979) FLC 90-612 at 78,146
Accordingly, this court is not in a position to overlook the legislature’s intention that, ordinarily, property proceedings arising in respect of a de facto relationship should be commenced within two years of the breakdown of the de facto relationship in question.
The chief rationale informing this intention being that former parties to a de facto relationship are entitled to a sense of finality in respect of issues arising from their previous relationships and that delay, of itself, has the potential to lead to injustice.
However, in order to temper any potential hardship, the legislature has also provided a discretion to the court to extend time. This discretion must be exercised judiciously and advisedly. In Whitford the Full Court determined that the manner in which this discretion is to be exercised must depend on the facts of the particular case. It is an idiosyncratic decision.
Relevant matters for consideration include the length of the delay; the reasons for the delay; any prejudice occasioned to the respondent by reason of the delay; the strengths, on the merits, of the applicant’s case; and the degree of the hardship, which would be suffered unless leave was granted. These are all matters relevant to the exercise of the discretion, but not necessarily the only ones.[10]
[10] Ibid at 78,146
In Jacenko & Jacenko[11] Nygh J referred to the relevant principles applicable to an application pursuant to section 44(3) [the equivalent of section 44(6) applicable to divorce orders] and said as follows:
[11] See Jacenko & Jacenko (1986) FLC 91-776 at page 75,644
“The applicant must establish three principal matters: first, a reasonable prima facie case for relief, had she instituted proceedings in time; secondly, that denial of the wife’s claim would cause her hardship; and thirdly, an adequate explanation as to her delay.
…
If those three elements are satisfied, the Court should further, in determining whether to exercise its discretion to grant relief, consider the question of prejudice which the respondent would suffer by reason of the delay in bringing the application.”
Nygh J also considered that relevant binding authority also provided that, in “appropriate cases the degree of hardship to be suffered by the applicant may well outweigh an inadequate explanation of delay.” Accordingly, it seems apparent that one of these factors is not to be regarded as preeminent over the other nor must all be satisfied. Rather it is a question of them each being weighed and considered so that the interests of justice are served in the individual case concerned.
In Jacenko the court considered the matters to be considered in determining whether an applicant for leave to proceed out of time had or had not established a prima facie case for relief in respect of matrimonial property settlement orders.
These considerations are relevant given the leave issue must most usually be determined as a preliminary matter, as in the current case, at an interlocutory stage, prior to a more detailed examination of all relevant evidence by the court. The court held as follows:
“… the general principle is that on the issue of the establishment of a prima facie case the Court proceeds on the basis that the evidence of the applicant, unless it is inherently unbelievable or contradictory, should be accepted, and the Court should therefore decide whether or not on that basis a prima facie case has been made out. If leave is granted, then it is for the Court conducting the ultimate hearing to determine whether the prima facie case can be established.”
In Hall and Hall[12] the Full Court of the Family Court reviewed a number of earlier cases which had addressed the issue of the required strength of the prima facie case in s 44(3) applications. The Full Court said:
“These varying phrases may tend to suggest different shades of meaning whereas in reality they are directed to the same fundamental enquiry 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.”
[12] See Hall, K A and Hall, J C (1979) FLC 09-679
In Sharp & Sharp[13] the Full Court considered that, in the context of section 44(4), hardship involved more than the loss of a right to commence proceedings. It was what followed from the loss of that right, which was central. This was the basis of the test that an applicant must have a prima facie claim worth pursuing or a real probability of success.
[13] See Sharp & Sharp [2011] FamCAFC 150
In Sharp the Full Court summarised the relevant test in the following terms:
“[T]he 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”.[14]
[14] Ibid at [18]
In Edmunds & Edmunds[15] the Full Court indicated that the assessment of such a prima facie case involved:
“… a consideration, but not a final determination, of the nature of the applicant’s claim. In doing so, the Court must weigh the applicant’s case against that of the respondent’s and form a view as to whether there is in fact a prima facie case, or a real probability of success, that would, if leave were granted, alleviate hardship.”
[15] Edmunds & Edmunds [2018] FamCAFC 121 at [48]
A further gloss was placed more recently, on this statement of principle, by the Full Court in Gadzen & Simkin[16] which indicated that the assessment of prospective costs was a part of the exercise of assessing a prima facie case. The Full Court said as follows:
[16] Gadzen & Simkin [2018] FamCAFC 218 at [37] – [42]
“…the starting point in determining an application for leave is to consider the question of hardship which requires for its existence a conclusion that an applicant has a prima facie or arguable case of substance having regard to all of the circumstances of the case. That must take into account the costs or likely costs to be incurred in pursuing the claim.
…
An analysis of the potential claim of the de facto wife was necessary to determine whether or not hardship would be occasioned to the de facto wife if she were not granted leave to pursue that claim. Further, as the authorities to which reference has been made demonstrate, an essential element is to consider the prospective legal costs of pursuing the identified or identifiable claim. Obviously, the prospective costs may render the conclusion that no hardship would be occasioned to an applicant to pursue an uncommercial claim. ”
In this particular case, Ms Angell places particular weight on how she assesses the strengths and merits of Ms Beal’s case, particularly in the context of the likely costs to be incurred by her, when set against the pool of assets. This, in my view, is the central issue in the case, which requires an analysis of the evidence currently available.
Mr Flores asserts contribution factors favour him, particularly in the form of pre-relationship contributions. He asserts that he provided a car worth $37,000.00 and $14,000.00 in cash to Ms Beal. Ms Angell submits these amounts represent a significant proportion of the asset pool. In these circumstances, Ms Beal must demonstrate that she is likely to receive a significantly greater amount, within the context of her likely costs, to justify the decision to proceed further.
For obvious reasons, the conduct of the parties in a section 44(6) application is relevant to the exercise of the discretion to extend time. The normal rule is that de facto property proceedings be brought within two years. An extension of time is exceptional. It is essentially an equitable decision.
Also highly relevant is any prejudice, which may be caused to the respondent to such an application, if leave is granted. This in turn is very often related to the length of the delay in question. All these various factors must be balanced against one another to achieve a proper outcome.
In this context, consideration must be given as to the reasons why there has been a delay in the institution of proceedings. In Slocomb & Hedgewood[17] the Full Court was dealing with an application for leave to proceed which was eighteen years out of time.
[17] Slocomb & Hedgewood (2015) FLC 93-678
Slocomb involved a married couple, who had been divorced in 1995. At first instance, the trial judge refused leave to proceed and noted that attention was drawn to the applicable time limits in the Decree Nisi document which was forwarded to each party following divorce.
In the current case, in my view, it should be noted that in distinction to the parties to a marriage, the parties in a de facto relationship are not always provided with clear points of demarcation as to when their relationship begins and ends as a matter of legal technicality.
In the case, the Full Court approved the passage of Nygh J from Jacenko to which I have already referred at [79] and said as follows:
“In appropriate cases the interests of justice might overcome long delay and on occasions an inadequate explanation for the delay, which is only one factor to be considered in determining an application for leave pursuant to s 44(3) of the Act.”[18]
[18] Ibid at 80,548 [42]
From these various authorities, in my view, the following principles may be distilled in respect of the exercise of the discretion to extend time:
·limitation periods are significant as they are created by the legislature to safeguard legitimate public interests. As such, they should not be arbitrarily over-ruled;
·however, the discretion to extend time is to be liberally exercised in order to avoid hardship;
·hardship is more than the loss of an entitlement to bring proceedings. Rather the court must look at what are the consequences, for the applicant concerned, of not being able to institute proceedings;
·the applicant must establish a reasonable prima facie case for the relief sought, if the proceedings had been brought in time. What this means is whether, on the material available, the applicant has a reasonable claim;
·this process of assessment must involve the likely strengths and merits of the claim sought to be advanced, including prospective costs;
·there must be a real possibility of success. Hardship will not arise if leave is not granted to pursue a claim which is assessed as being uncommercial;
·in assessing what is a reasonable prima facie case, the court should accept the evidence of the applicant concerned, at its highest, unless it is patently absurd or contradictory;
·the applicant must establish that he or she would suffer hardship if an extension is not granted;
·the discretion to extend time must be exercised judicially;
·as such, a reasonable explanation for the delay must be provided;
·also relevant, in this context, are the following:
o the length of the delay;
o the prejudice to the respondent if leave is granted;
o any other relevant consideration;
·however, an explanation for delay is but one factor amongst several and the overall interests of justice may overcome what is to be regarded as an inadequate explanation.
Discussion
The relationship involved in this case was of approximately five years in duration. It produced two children currently aged seven and four. As such, the children will be financially dependent on their parents for a significant period of time.
Issues in respect of arrangements for the care of these children remain highly controversial and are as yet unresolved. In this context, a family report has been prepared and released to the parties. Issues of family violence are canvassed in the report but its extent and its implications remain at large.
The family report is not in favour of the relocation sought by the mother and recommends a cautious approach be taken for the remainder of 2019 and 2020 given Y’s tender years. Thereafter, the writer recommends consideration being given to an equal time regime. These remain controversial recommendations, from each party’s perspective.
In these circumstances, the prospects of the parties requiring the adjudication of the children’s aspects of the case seems to me to be objectively significant. Accordingly, whether or not Ms Beal is given leave to proceed, there is a reasonably strong prospect that there will be protracted proceedings between the parties, involving each of them incurring costs.
In my view, this is a factor which potentially counteracts Mr Flores’ submission that Ms Beal’s property claim is commercially unviable, given the strong likelihood that there will be a need for lengthy proceedings between them regardless of the property aspect of the matter.
Mr Flores has estimated his assets and liabilities as follows:
A Street, Town B
$300,000.00
C Street, Town B
$120,000.00
Savings
$2,500.00
Motor vehicles
$62,000.00
Household contents
Superannuation
TOTAL
$3,000.00
$120,000.00
$607,500.00
To this sum may potentially be added back the assets already advanced to Ms Beal, namely the Motor Vehicle D and cash to a value of $14,000.00. The Motor Vehicle D was purchased for $37,777.00 in late 2015 by Mr Flores but it is common ground Ms Beal has retained it. She values it at $25,000.00. It is her case that there is a vast discrepancy in superannuation. She deposes to superannuation of $3,492.000
Ms Beal disputes the extent of the cash advances but asserts that they were used by her to re-house herself and the children in the circumstances of the emergency confronting her following the parties’ separation. It is her case that the sums are long gone but her straitened financial situation remains. Doing the best I can, the likely pool of property is a modest one, of less than $650,000.00.
From this sum must be deducted Mr Flores’ mortgage liability of $297,256.00 and his car loan of $18,785.00. In round terms, the net asset pool, in which I have included the financial resource of the parties’ superannuation, is, at best, somewhere in the vicinity of $335,000.00. In such circumstances, the court and indeed the parties themselves, must bear in mind the proportionality of what is at stake with the costs likely to be involved.
It is the submission of Ms Angell that Ms Beal is likely to receive somewhere in the vicinity of 20% of any asset pool; whilst Ms Horvat, counsel for Ms Beal, asserts that when issues to do with the future parenting of the children; child support; and the disparate incomes of the parties are considered; the figure is likely to be closer to 40%.
On my current calculation of the asset pool, this equates to a range of somewhere between $67,000.00 and $134,000.00. It is likely there will be future controversy in respect of the add back issues. There is no automatic principle that notional assets should be arithmetically taken into account. Recently, in Trevi & Trevi[19] the Full Court has reiterated that the court’s authority to add back is both discretionary and exceptional in nature. The court said as follows:
“Two fundamental premises emerge from Omacini and the authorities preceding it. First, ‘adding back’ is a discretionary exercise. When the discretion is exercised in favour of adding back, it reflects a decision that, exceptionally, in the particular circumstances of a case, justice and equity requires it. The second premise is its corollary: in cases that are not ‘exceptional’ justice and equity can be achieved, not by adding back, but by the exercise of a different discretion – usually by taking up the same as a relevant s 75(2) factor. Indeed, it has been said that the latter is ‘a course which is, perhaps, technically more correct’ than adding back to the list of existing interests in property.”
[19] Trevi & Trevi [2018] FamCAFC 173 at [30]
Ms Beal no longer has the $14,000.00 advanced to her on separation by Mr Flores. She utilised this sum when she had to re-house herself and the children, in the difficult circumstances following the parties’ separation. At the same time, Mr Flores had the security of the A Street, Town B property. As such, it may the case that this will be a factor, at any final hearing, more amenable to being considered under the provisions of section 90SF(3)(r) rather than an add back per se.
If this is the case, Ms Beal has received the Motor Vehicle D alone. The parties disagree about its value but, as with most motor vehicles, it is likely to be an asset which is depreciating rather than appreciating in value. As such, the value ascribed to it by Ms Beal may be a more useful one than Mr Flores’ calculation of its value at the time the parties separated.
In these circumstances, there is significant weight to Ms Horvat’s submission that her client, if given leave to proceed, is likely to derive more from the case than a motor vehicle, given her circumstances, particularly as a person who is likely to have the primary care of two children under the age of ten years until at least the end of 2020.
I acknowledge the pool of assets is a modest one. It is also significant that Ms Beal came into the relationship with very little asset backing, whilst, on the other hand, Mr Flores had two pieces of real property, albeit subject to mortgage. In these circumstances, Mr Flores is correct that his initial contributions require some form of special recognition.
However, as I am at pains to point out, the making of any de facto property order must turn on what is just and equitable in all the circumstances. In my view, putting aside the time limit issue, the case is a difficult one. As with many cases, particularly those involving small asset pools, the real weight of the court’s deliberations, arises at the third stage.
In this context, the most significant disparity between the parties is their current level of income. Mr Flores, although he cannot be considered to be a wealthy person by any means is capable of earning well in excess of $100,000.00 per annum. I accept that he works hard to earn this sum. On the other hand, Ms Beal earns less than $20,000.00.
It has been said, by the Full Court, that the most valuable “asset” a party can take out of a marriage (and by necessary implication a de facto relationship) is “a substantial, reliable, income-earning capacity”.[20] In my assessment, Mr Flores has such a capacity but Ms Beal does not or certainly not to the same degree.
[20] See Clauson & Clauson (1995) FLC 92-595 at 81,911
It is also important to note that Ms Beal has re-partnered. She has not provided a great deal of evidence regarding her partner, other than that her financial statement indicates that he is Mr E and he earns $2,000.00 per week, which is reasonably equivalent to the income derived by Mr Flores.
Mr E attended the interviews for the recent family report, as did Mr Flores’ current partner, Ms F. Mr E is a FIFO worker. Ms F lives in Queensland but regularly visits Town B. The children seem to have a reasonably positive relationship with both Mr E and Ms F.
Mr E is under no legal duty to provide financial support for X and Y. However, given that he shares accommodation with these children and their mother, it would be naïve to think his financial situation is not relevant. His income provides a buttress for Ms Beal.
Mr Flores is a PAYG taxpayer. As such, his income is likely to be readily amenable to the application of the child support formula to it. Accordingly, Ms Beal will continue to receive child support from Mr Flores. However, such payments are not likely to provide full recompense for the costs of providing for young children.
In addition, Ms Beal’s responsibility for the children may impact upon her ability to engage in full time employment. Although, in this context, I note that she pursues a vocation which must be regarded as child focussed in nature.
On balance, the section 90SF(3) factors are likely to favour Ms Beal to a significant degree, particularly given the tender years of the children concerned and her modest income. Contribution factors favour Mr Flores but this was a relationship of a reasonable length.
At the end of the day, the court will be called upon to weigh up and assess disparate contributions arising in the course of a five year relationship which produced two children. This is not a purely arithmetical task. Rather it is one of justice and equity.
As with many cases, involving small asset pools, modest changes in the calibration of percentages can have significant implications for the outcome of cases. In addition, merely because the asset pool is small does not absolve the court of its responsibility to do justice and equity.
For obvious reasons, a distribution of a few thousand dollars can have enormous implications for the quality of life of a person who has very little or who is likely to remain in receipt of social security or a modest income for the foreseeable future.
In all these circumstances, I consider that Ms Beal has demonstrated that she has a real possibility of recouping more from her property proceedings than the Motor Vehicle D alone. However, that is not the end of the process involved in the court’s determination as to whether or not to grant her leave to proceed out of time.
The court must now consider whether to refuse leave will cause Ms Beal to suffer hardship. In blunt terms, if the loss of opportunity involved is one of a modest sum and the costs likely to be incurred in achieving it are likely to be equivalent or greater, there can be no such hardship, as the lost cause will be uncommercial to pursue.
It is difficult to provide definitive answers to such questions in a case such as the present one. I have not been given definitive estimates of the likely level of costs. However, my experience suggests that there is a real risk that the proceedings will be rendered nugatory by costs.
Mr Flores has no liquid assets. It may well be an affront to principles of justice and equity, if he is compelled to sell his real properties, which he had prior to his relationship with Ms Beal, in order to satisfy any judgment made in her favour. It would be added injury if the costs involved were significant.
However, the issue of whether to grant leave to proceed is one which, fundamentally, is to be determined within the context of what is in the overall interests of justice. In this context, it is to be noted that the claim is not inordinately out of time. The period is one of months rather than years. The period also coincides with one in which the parties were engaged in vociferous and acerbic disputation with one another, particularly in regards to parenting arrangements.
As such, it appears likely that both were aware, in general terms, that their financial relationship with one another, could be amenable to some form of court adjudication. However, as previously indicated, unlike the parties to a marriage, there were no clear cut lines of demarcation provided to the parties in this case, as to when such proceedings needed to be brought.
In this context, issues to do with the financial wisdom of Ms Beal pursing a claim, the quantum of which was potentially disproportionate to the costs likely to be incurred, would not have permitted the court to dismiss such a claim, if it had been brought in a more timely fashion.
Regrettably, a lower level court, such as the Federal Circuit Court, frequently has to deal with cases involving strong emotions and animosity, and limited assets; against a background of significant legal costs. It has mechanisms, including compulsory conciliation, which are directed to protecting parties from the worst aspects of adversarial litigation.
Mr Flores characterises Ms Beal as being unreasonable and difficult to deal with and as a parent who was obstructive in respect of arrangements to do with the children because of her demands for financial settlement. It is his evidence that she canvassed with him a possible mediated settlement of property issues as early as January of 2017. Both complain in respect of the division of household items between them in the period following separation.
This is not a case where it could be said that Ms Beal clearly indicated that she would not be pursuing what she perceived to be her proper entitlements arising from the end of her relationship with Mr Flores. Although Mr Flores may consider her claim to be brazen or greedy, he can hardly claim that it has come out of the blue.
Rather the evidence indicates that, in the highly acrimonious circumstances existing since their separation, the parties have been jockeying around one another, in significant dispute about all manner of issues, ultimately leading to Ms Beal commencing proceedings. This period coincided with the exchange of unhappy text messages between them. Essentially, the proceedings begun in October 2018 have not come out of a vacuum.
It is Ms Beal’s evidence that she was unaware that there was a specific time limit in respect of property issues. In addition, in the period post separation and afterwards, she asserts that she was focussed on issues to do with care arrangements for the children and, in this context, obtained some legal aid advice, which did not include information about property.
In this context, she asserts that she felt fearful of Mr Flores, particularly that he might act precipitously in respect of retaining the children in his care, if she broached any financial issue with him. On the other hand, it is Mr Flores’ evidence that he felt Ms Beal was intent on using his relationship with the children to her advantage.
The evidence does, however, indicate that, at least informally, Ms Beal did raise some financial issues with Mr Flores, otherwise there is no logical explanation for the fact that he provided her with monies to finance her new accommodation and transferred the Motor Vehicle D to her.
Rather the parties reached a series of ad hoc agreements which were directed to provide Ms Beal and the children with some security in the period following separation. She was provided with some money to pay a bond and rent in advance on accommodation and to acquire some furnishings. She took the motor vehicle which she had had during the relationship. No doubt, she needed transport because of her parenting responsibilities.
The parties did not document what was the legal significance of these transfers of property. Certainly, there was no indication from either party that the payments in question were intended to finalise financial issues between them. In addition, as previously indicated, the payments were made in the context of financial emergency so far as Ms Beal and the children were concerned.
I am not in a position to resolve the parties’ competing assertions arising from their respective allegations of being the victim of the other’s family violence. However, over an extended period, I am satisfied that the situation between them was volatile and unpredictable. This made it difficult for them to engage in any calm or rational discussions in respect of property matters.
In these circumstances, it is Ms Beal’s position that she was reluctant to raise issues to do with property with Mr Flores out of concern that this might precipitate an extreme reaction from him particularly because he might withhold the children.
On the other hand, it is Mr Flores’ perspective that Ms Beal is being disingenuous about property and has, in effect, sat on her rights. Ms Beal does concede that she was advised that there was a time limit, for de facto property proceedings, when she approached a community based mediator. Precisely when this was she does not specify.
In my view, the transfers of property occurred in a volatile and unpredictable situation and what was their overall significance, so far as the parties’ respective rights were concerned, was and remains far from clear. If they did represent some form of negotiation, that negotiation was far from complete, certainly from Ms Beal’s perspective and Mr Flores did nothing to dissuade her in this regard.
In this context, in my view, it is relevant that the children’s aspect of the case was also far from resolved and the parties remained in strained discussions about these matters. Given this state of affairs, in my view, I am not in a position to reject Ms Beal’s explanation for the delay out of hand. It appears to me to be a plausible one.
Essentially, she did not raise property for fear of making a volatile situation, with Mr Flores, worse than it already was. However, this, of itself, does not necessarily indicate that she did not consider she had some form of viable claim, for property orders, as a consequence of the end of her relationship with Mr Flores.
Clearly, it will be prejudicial to Mr Flores, if Ms Beal is given leave to proceed out of time. Such an outcome will leave him open to a potential claim significantly greater in percentage terms than he has already provided to Ms Beal.
Balancing this consideration against the consequences for Ms Beal, if she is not able to pursue her claim, it seems to me that her hardship is greater. I am not able to rule out the possibility that she has not received a just and equitable share of the assets referrable to the parties’ relationship with one another.
If the court accepts that the only asset, in effect, Ms Beal has taken from the relationship is the Motor Vehicle D and it is given the value attributed to it by her, she will take less than 10% of the asset pool. Given the length of the relationship and issues to do with the on-going care of the children concerned this does not have the appearance of being a just and equitable outcome, notwithstanding the risk of erosion of the relevant asset pool through legal costs.
The case is a finely balanced one, but I have reached the ultimate conclusion that it would be contrary to the interests of justice not to grant Ms Beal’s application. The next step is to refer the parties to a conciliation conference in the hope that this will assist them to a negotiated outcome.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and fifty (150) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 16 August 2019
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