Castilla and Castilla

[2018] FCCA 2079

FEDERAL CIRCUIT COURT OF AUSTRALIA

CASTILLA & CASTILLA [2018] FCCA 2079

Catchwords:
FAMILY LAW – Property – leave to proceed twenty months out of time – hardship shown – leave granted.

Legislation

Family Law Act 1975 (Cth), ss.44(3), 44(4) and 75

Cases cited:

In the Marriage of Althaus (1979) 8 FamLR 169
Sharp & Sharp [2011] FamCAFC 150
Slocomb & Hedgewood [2015] FamCAFC 219

Applicant: MR CASTILLA

Respondent: MS CASTILLA

File Number: BRC 8129 of 2014

Judgment of: Judge Cassidy

Hearing date: 25 May 2018

Date of Last Submission: 25 May 2018

Delivered at: Brisbane

Delivered on: 2 August 2018

REPRESENTATION

Counsel for the Applicant: Dr Brasch

Solicitors for the Applicant: Hopgood Ganim Lawyers

Counsel for the Respondent: Mr Williams

Solicitors for the Respondent: Barry Nilsson Lawyers

ORDERS

1. That leave be granted to the Applicant pursuant to sections 44(3) and (4) of the Family Law Act 1975 (Cth), to apply for an order under section 79 of the Family Law Act, such application to be filed within twenty-eight (28) days of the date of these Orders.

2. That the costs of and incidental to this application and response be reserved.

3. That the matter be adjourned for mention only at 9:30am on a date to be advised in November 2018 in the Federal Circuit Court of Australia at Brisbane.

IT IS NOTED that publication of this judgment under the pseudonym Castilla & Castilla is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRC 8129 of 2014

MR CASTILLA

Applicant

And

MS CASTILLA

Respondent

REASONS FOR JUDGMENT

Introduction

1. The applicant in these proceedings is Mr Castilla (“the Husband”), the former husband of Ms Castilla (“the Wife”). The husband seeks leave to proceed out of time with his application for property settlement.

Background

1. The husband was born on 1973, he is now forty-five years old. The wife was born on 1973 and is now forty-five years old. The parties did not cohabit prior to the marriage, they married on 1998.

2. There are three children of the relationship, [X] born 2005, [Y] born 2007 and [Z] born 2009 (“the Children”). The husband and wife separated on 29 October 2012. A divorce order was made on 6 December 2014. These proceedings were commenced on 22 August 2017. The wife remarried in 2016.

3. The husband worked throughout the marriage initially as a (occupation omitted) and in more recent times in (occupation omitted). He has had some periods of unemployment.

4. The wife worked initially as a (occupation omitted) and then as a (occupation omitted) for a (employer omitted). Since the birth of [X] in 2005 she has been a home maker, caring for the three children.

5. There is no dispute that the husband has received compensation for personal injuries on two occasions. The first amount on his evidence was $222,000 in 1993. Some part of this was used to purchase the parties’ first real property at Property A. The Property A property was sold in 2001 for $405,000. Then the parties purchased a property at Property B in 2001 for $780,000, borrowing $660,000 and using the proceeds of sale of the Property A property to make up the purchase price.

6. On 2002 the husband purchased Property C for $550,000 in the husband’s sole name. This property was tenanted. The total purchase price of $550,000 was borrowed for the purchase of this property.

7. On 2003 the husband and wife purchased a property in Property D, New South Wales for $1,100,000 million. The wife’s evidence is the mortgage was $450,000.

8. On 2004, the husband and wife sold the Property B property for $952,000. On 2007 the husband received $325,000 for a neck injury. On 2008 the parties sold the Property D property for $1,500,000 million and the wife’s evidence is the nett proceeds of the sale of the home were $1,000,000.

9. The parties relocated to Brisbane in 2007 and lived in rented premises. They decided to renovate the Property C property and in late 2008 a builder was contracted.

10. The wife’s evidence is she understood the parties had $1,450,000 in savings to use for the renovation. Construction of the Property C renovations were commenced, but by May 2009 cheques written by the husband to the builder were dishonoured.

11. The wife’s family came to the assistance of the parties to enable the renovations to proceed. The wife’s evidence is that the building work proceeded and the Property C property was sold on 2009 for $2,700,000. Her evidence is:

    “167. My father prepared a schedule of the costs of the build and the application of the sale proceeds. I have reviewed the schedule and note that the sale proceeds were applied as follows:

(a)	Agent’s commission	$40,000
(b)	Discharge Bank 1 Mortgage	$1,156,000
(c)	Final payment to the builder, Mr C	$109,561.77
(d)	Third parties	$529,000
(e)	Joinery on Property C	$45,316.50
(f)	Retention retained	$9,000
(g)	Balance applied to purchase of Property E	$881,121.73

168. Third parties that advanced funds were repaid from the sale proceeds. The loan from Mr P to Mr Castilla in the sum of $150,000 which was organised through Mr J was repaid by me from the sale proceeds of Property C.

169. Shortly after settlement of Property C, Mr Castilla and I were approached by his parents to repay them the sum of $120,000.

170. In a conversation with Mr Castilla, I said: “Why should I have to reimburse them? It’s your responsibility. Why don’t you take out a personal loan?”

171. I felt under significant pressure from Mr Castilla to agree to repay his parents the sum of $120,000 even though I considered this debt was Mr Castilla’s responsibility. I repaid Mr Castilla’s parents the sum of $120,000 from the sale proceeds of Property C which had been paid to my personal Bank 2 account.”

1. On 2009 the wife entered into a contract to purchase Property E in her sole name. The settlement of Property E on 2010 was funded as follows:

(a)	Deposit	$63,750.00
(b)	Mortgage from Bank 1	$450,000.00
(c)	Monies from wife’s Bank 1 account no.	$590,401.29
(d)	Monies in Bank 1 offset account	$196.000.00

1. On 2010 the parties’ youngest son, [Z] was involved in a very significant motor vehicle accident when the husband inadvertently backed his car over the toddler. The little boy was hospitalised with very serious injuries. There is some dispute as to whether he has made a full recovery or not.

2. The wife received a significant personal injuries payout of $506,606 on 2017 as a consequence of post-traumatic stress suffered as a result of the motor vehicle accident.

3. The parties separated on 29 October 2012. The wife’s evidence is that the mortgage on Property E was $70,000 at separation. The mortgage on Property E was discharged on 2014. The wife’s evidence is the mortgage was discharged from joint funds.

4. The wife’s evidence is that Property E is valued at $1,550,000 and she has approximately $500,000 from the personal injuries claim so she has just over $2,000,000 in property.

5. The husband’s evidence is that he has $299,751 in debt and $29,546 in assets excluding superannuation. The debt is from a 2002 investment in (Company) and a school fees debt for the parties’ son [X].

The legal principles

1. The legal principles have been adequately traversed in the submissions of both the husband the wife. The inquiry I must undertake is not a detailed hearing on the merits. The question is not whether the claim will succeed but, “the exercise is to determine whether there is a reasonable claim to be heard. That is the essence of the inquiry into whether hardship will be suffered by denying the applicant the right to litigate that claim.”[1]

   [1] In the Marriage of Althaus (1979) 8 FamLR 169 at [13].

2. The general principle is summarised in the text Australian Family Law:[2]

   “[s 44.18] General principles on application for leave under s 44(4) and (6)

   Section 44 does not state what principles should guide the court on an application for leave, except that the court must be satisfied that hardship would be caused to a party or a child if leave were not granted: s44(4) and (6). The Full Court has stated the general principles in slightly different ways, but it is submitted (RC, SO’R) that it is now well established that on an application for leave two broad questions arise:

   (a) Whether hardship would be caused to a party or a child of the marriage if leave were not granted. If such hardship is not established, the application for leave must be dismissed.

   (b) If the court is satisfied that hardship would be caused, it should proceed to consider whether leave should be granted. This is a discretionary matter, and the court may have regard to a number of factors, including 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, or other persons. Questions of degree arise at this stage. Thus it might be that an applicant establishes the necessary hardship to satisfy s44(4), but the court declines to grant leave because, for example, the hardship to the applicant if leave were refused is outweighed by the hardship to the respondent if it were granted.”

   [2] LexisNexis, Australian Family Law, vol 1 (at Service 292) [1226.2]. 

Hardship to applicant

1. The husband has a significant debt from his 2002 investment with (Company). He faces bankruptcy if he is unable to pay this debt. It is a debt that was incurred because of investments made during the course of the marriage.

2. I note the wife’s counsel submits that hardship is not demonstrated. He submits:

   “23. In addition to the above, the assessment of the applicant’s claim occurs against a further number of principal parameters, which disavows of hardship if leave is refused, including:

   - First whilst the respondent has property standing to credit in her name, including the proceeds of the Property C property that were ultimately reinvested (after discharge of numerous indebtedness) in the Property E property, it was only in consequence of the actions taken by the respondent’s extended family in terms of the provision of loans and reorganising of finances that avoided the parties’ then inevitable financial fatality;

   - As identified above, it is plain that there was, in effect, no or very little “property’ of any value (aside from any superannuation) and that, but for the respondent’s family’s intervention, that situation would have remained;

   - The applicant does not contend that he could have obtained finance elsewhere to meet the then existing indebtedness in May 2009. It is simply the case that given the creditors then existing, the nature of the applicant’s earlier “investments”, the applicant’s forgeries of the respondent’s signature to procure finance, and his gambling, the applicant had unilaterally brought about financial destruction to the parties;

   - Second, in those premises, not only does any initial contribution of the applicant have no significance in a contributions based assessment, but he applicant’s profligate financial behaviour removes this case from that ordinarily litigated. That conduct is so deleterious in its effect, and at times fraudulent, that it warrants recognition as a negative contribution: see Ibbott & Ibbott [2008] FMCAfam 38 per Brown FM (as his Honour then was) at [224]. It is a course of reckless, negligent and wanton conduct. No alternate conclusion is open. Those factors bear upon the application of principles emanating from Stanford v Stanford (supra);

   - Third, the applicant has bought about his claimed indebtedness to various creditors simply by his own making. He has provided little by way of financial support to the respondent in the period subsequent to separation, and almost nothing since January 2015 notwithstanding that he has remained in gainful employment and now on a declared income of $300,000 per annum: see the applicant’s second affidavit, para [37(12)]. There is little to no explanation by the applicant as to the application of monies he has earned from gainful employment or otherwise;

   - Further, the contributions by the respondent particularly from 2009 and, directly from her family, are simply overwhelming;

   - Fifth, in the period post-separation, there is no probative evidence of any material contribution made by the applicant;

   - Sixth, of the sum now standing to credit in the respondent’s name, in excess of $500,000 is on account of the monies received by her in consequence of the damages claim for the psychological injuries she suffered as  result of the accident on 2010. She suffers, inter alia, an impairment to her earning capacity: respondent affidavit, para [280]; and

   - Seventh, the applicant has not identified his anticipated legal expenses in the prosecution of any substantive proceeding if leave be granted.”

3. I do not accept that I can make adverse findings about the wisdom of the husband’s “investments.” The wife’s Counsel submitted that I should find that the effect of the forgeries of the respondent’s signature on the property pool and his alleged gambling “unilaterally brought about [the] financial destruction of the parties”. Those determinations are a matter for trial.

4. I note the husband was the only person in the family earning an income when the parties moved into Property E. There existed a mortgage to Bank 1 of $450,000. The wife’s evidence is this mortgage was paid out in 2014. I accept that in the absence of contributions other than income, the mortgage pay out was funded from the husband’s income.

5. Therefore it is difficult to conclude without testing the evidence that the wife’s contributions from 2009 “are simply overwhelming”.

6. I find that the husband has demonstrated hardship in that he only has debt arising from the marital relationship and the wife holds - among other assets – Property E, the former matrimonial home valued at $1,550,000.

Discretionary considerations

Explanation for the delay

1. I accept the husband was personally served with the wife’s application for divorce on 11 September 2014. I accept the husband had that document. The evidence supports the husband read the last page of the document that relevantly sets out:

   “Property and maintenance

   If you want to apply to the Court about property or your own maintenance, you must file a separate application within 12 months of the date the divorce becomes final. Otherwise, you will need the Court’s permission to apply.”

2. Deputy Registrar Kane made an order on 5 November 2014 that the divorce order was to take effect on 6 December 2014. The notes of that order relevantly provide:

   “1. If a party to the marriage proposes to make an application to a court exercising jurisdiction under the Family Law Act 1975 as to property or as to the maintenance of that party, such application must be made within 12 months from the date upon which this divorce order takes effect. After that time such an application cannot be made without first obtaining the leave of the court to do so.”

3. Hence the limitation period for the commencement of the property proceedings without leave expired on 6 December 2015. The husband did not seek leave until 22 August 2018, approximately 22 months after the expired date. The evidence that the husband was overseas does not adequately explain the delay. I accept the evidence establishes the husband was in Australia from 2015 until 2016.

4. However, given the financial position of the husband, I accept he could not afford the $20,000 required to be paid by him by Jones McCarthy to seek leave. This advice was provided on 16 November 2016. The husband’s evidence is that Hopgood Ganim were prepared to defer their fees.

5. The husband relies on the following authority to support an analysis of delay that would not be fatal to his case:

   “ 1.15 Delay cannot stand in the way of justice being done:

   (a) in Montano & Kinross (2014) FamCAFC 231 Murphy J commented that “an application for leave to apply after the end of the standard application period requires the Court to exercise its discretion in a manner that ultimately, is consistent with justice being done to both parties” (at 14).

   (b) Similarly, in Tamaniego & Tamaniego [2010] FamCAFC 254, O’Ryan J commented that “…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; referred to by Murphy J in Montano  Kinross at 31.

   (c) Further, in Brisbane South Regional Health Authority V Taylor (1996) 186 CLR 541 at 553 (in the context of civil proceedings) Justice McHugh stated ‘a limitation period should not be seen…as an arbitrary cut off point unrelated to the demands of justice…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’

   (d) This passage has been cited with approval by the Full Court of the Family Court regarding applications for leave to proceed out of time, see for example Sharp & Sharp (2011) FamCAFC 150 at 14 where the majority said ‘…there is nothing to suggest that this expression of law in general is not entirely applicable to a consideration of s44 of the Act…’

   (e) Further, in Tamaniego at 162, O’Ryan J commented that in ‘summary…the Court may have regard to a number of factors including 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….’ (cited by Murphy J in Montano & Kinross at 31)”

6. I also note in Slocomb & Hedgewood [2015] FamCAFC 219 the Full Court held:

   “39. The oral argument of counsel for the wife in the appeal, submitting error on the part of the judge, concentrated on the treatment by the judge of the question of delay and the significance he gave to what he regarded as the wife’s inadequate explanation. There is no doubt that explanation for delay is no more than a factor to be considered in the circumstances of the case.

   40. Reference was made to Carlon and Carlon (1982) FLC 91-272 at [77,533]:

   …[I]t is in our judgment a correct statement of the law that while Parliament in sec. 44(4) has placed a fetter on the discretion of the Court, the Court itself should not and probably cannot do the same by laying down any strict principles such as that a party must give an adequate explanation for delay. Once hardship has been established in the sense referred to in Whitford (supra) then the Court is in the exercise of its discretion at large and should take into account all relevant facts including, if that be the case, that no or no satisfactory explanation has been given for delay. Such a position namely no or no satisfactory explanation for delay is no more than another factor which must be given appropriate weight in the exercise of discretion.”

7. I consider that the husband’s explanation for delay is less than satisfactory but not of itself a basis for not granting leave. Given his financial position verses the wife’s.

Prejudice

1. I note the submission by the wife’s counsel rely on the reasoning of May and Ainslie-Wallace JJ in Sharp & Sharp [2011] FamCAFC 150 at paragraph [97]:

   “97. Merely because the respondent to an application for leave does not point to particular prejudice that might arise if leave were granted, does not dispose of the question. The law presumes prejudice to flow to a person sought to be joined in litigation after the effluxion of the relevant time limits. Even if the Court came to the view that there was no significant prejudice to the respondent, the Court may consider whether in all of the circumstances of the case, it is just and reasonable to grant the extension sought The New South Wales Court of Appeal in McLean v Sydney Water Corporation [2001] NSWCA 122, per Giles JA (Hodgson and Stein JJA agreeing) said at 22 that:

   “….prejudice engendered by delay and unlikelihood of a fair trial will be highly material, and if there is prejudice and unlikelihood of a fair trial that will tell strongly, often inconclusively, against the grant of an extension of time. It does not follow that in the absence of prejudice (other than general prejudice) an unlikelihood of a fair trial it will be just and reasonable to grant an extension of time.”

1. The submission outlines that the wife has moved on and I note the wife remarried in 2016. However, she is still residing in the unencumbered Property E property that forms the significant asset the parties acquired during the relationship. I accept the wife’s family offered considerable assistance to the parties to enable them to ultimately acquire Property E in the wife’s name, however the fact that the significant asset is still in the wife’s name does not demonstrate the wife has so organised her affairs that it would cause a prejudice to her for the leave to be granted.

2. The converse is that the husband is in a very difficult financial position. The prejudice to him of not being granted the leave on balance outweighs any prejudice to the wife.

Strength of applicant’s claim

1. It is submitted by the wife the husband has poor prospects of succeeding. I am not able to make that finding without testing the evidence of allegations of waste and reckless behaviour the wife argues the husband was involved in.

Orders

1. Therefore, I will grant the husband’s application requesting leave to proceed out of time. I will reserve the costs of this application and adjourn the matter for further directions.

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of Judge Cassidy

Date:  2 August 2018