COPE & KERRY

[2015] FCCA 373

FEDERAL CIRCUIT COURT OF AUSTRALIA

COPE & KERRY [2015] FCCA 373

Catchwords:
FAMILY LAW – Property – de facto relationship – leave to proceed out of time.

Legislation:

Family Law Act 1975, s.44

Althaus & Althaus (1979) 8 Fam LR 169, (1982) FLC 91-233
Hedley & Hedley (2009) FamLR 147, (2009) FLC 93-413
Tamaniego & Tamaniego [2010] FamCAFC 254
Sharp & Sharp [2011] FamCAFC 150, (2011) 50 FamLR 567
Hall and Hall (1979) 5 FamLR 411, (1979) FLC 90-679
Whitford & Whitford (1979) FLC 90-612
Montano & Kinross [2014] FamCAFC 231
Gallo v Dawson [1990] HCA 30, (1990) 93 ALR 479
Jacenko & Jacenko (1986) 11 Fam LR 341, (1986) FLC 91-776

Applicant: MS COPE

Respondent: MR KERRY

File Number: BRC 5543 of 2014

Judgment of: Judge Lapthorn

Hearing date: 13 October 2014

Date of Last Submission: 13 October 2014

Delivered at: Brisbane

Delivered on: 24 February 2015

REPRESENTATION

Solicitors for the Applicant: In Person

Solicitors for the Respondent: In Person

ORDERS

1. That pursuant to s.44(6) leave be granted for the applicant to apply for an order under s.90SM notwithstanding the expiration of the standard application period.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRC 5543 of 2014

MS COPE

Applicant

And

MR KERRY

Respondent

REASONS FOR JUDGMENT

Introduction

1. The applicant, Ms Cope, is hopeful of obtaining a property adjustment order as a consequence of the breakdown of her de-facto relationship with the respondent Mr Kerry.  In order to do so she will firstly need leave to bring her application as it is out of time.  The granting of leave is opposed by the respondent.  It is this preliminary point that I am asked to determine at this stage.

2. The Initiating Application was filed 25 June 2014 and amended on 8 August 2014.  If successful in obtaining the leave to proceed out of time the applicant has proposed she obtain a superannuation splitting order that would enable her to receive funds that are currently in the respondent’s superannuation fund.  The respondent has asked that the application be dismissed.

Background

1. The applicant is 47 years of age having been born on (omitted) 1967.  The respondent was born on (omitted) 1957 and is 57 years of age. The parties commenced to live together in (omitted) 1998 and according to the applicant they separated at the end of June 2010.  The respondent said separation took place in November that year.  For the purposes of determining this preliminary point only I will adopt the date asserted by the Applicant.

Documents relied on

1. The applicant relied on her:

   a)Initiating Application filed 25 June 2014;

   b)Amended Initiating Application filed 8 August 2014

   c)Affidavit filed 17 September 2014

   d)Various documents handed up in court forming exhibit A1

   e)Financial Statement filed 25 June 2014.

   f)Further written submission filed 19 October 2014 (after the date of hearing)

2. The respondent relied on his:

   a)Response filed 20 August 2014

   b)Affidavit filed 30 September 2014

   c)Financial Statement filed 20 August 2014

   d)Documents handed up in court forming exhibit R1.

   e)Further written submission filed 21 October 2014 in response to the post hearing written submission filed by the applicant on 19 October 2014.

3. The hearing proceeded on the papers without any testing of the evidence.  I am therefore not in a position to determine disputed questions of fact.  Whilst the parties tried to help the court by filing detailed affidavit evidence their affidavits were not easy to follow.  Nonetheless I am satisfied I had sufficient material to assist me make a determination of the preliminary point.

Legal Approach

1. The parties, not having married, were de-facto partners.  Accordingly the provisions of Part VIII of the Family Law Act 1975 are applicable. Because the applicant filed her application seeking the property adjustment orders more than two years after the date of separation she must obtain leave to proceed with the application out of time pursuant to s.44(6) of the Act. The two-year period is referred to in the Act as the “standard application period”. The granting of leave is discretionary but the court’s discretion can not be exercised unless the applicant has first established that she would suffer “hardship” if the leave was not granted. In determining this issue the court is not required to conduct “a detailed hearing of the merits of the claim”.[1]

   [1] Althaus & Althaus (1979) 8 Fam LR 169 at 172, (1982) FLC 91-233; See also Hedley & Hedley (2009) FamLR 147, (2009) FLC 93-413; Tamaniego & Tamaniego [2010] FamCAFC 254 and Sharp & Sharp [2011] FamCAFC 150, (2011) 50 FamLR 567

2. In Hall and Hall (1979) 5 FamLR 411, (1979) FLC 90-679 the Full Court[2] considered a number of authorities that had addressed what was meant by the term “hardship” and said at 78,627-28:

   ………  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 s.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 s.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.

   [2] Evatt CJ, Fogarty and Yuill JJ

3. A number of authorities have considered the second part of the consideration i.e. the issue of the exercise of discretion: See particularly the leading authority: Whitford & Whitford (1979) FLC 90-612 which has been the subject of much consideration.

4. Further to the quote from Hall above the Full Court said:

   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.   

5. In the recent decision of Montano & Kinross [2014] FamCAFC 231 Murphy J writing for the Full Court[3] said: 

   [14] Like many applications for indulgence, 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.  The potential for injustice to the applicant being unable to pursue the remedy precluded by the refusal to grant leave must be compared to the prejudice to the respondent in the granting of leave.  So, too, good or legitimate reasons for failing to do that which the Act requires must be compared with wilful blindness or recalcitrance.  Equally, a desire to pursue a remedy out of time must be compared to the necessity for parties to proceed with their post-separation lives free of the spectre of prospective litigation, (see, for example, Gallo v Dawson (1990) 93 ALR 479, and the statutory requirements in section 81 of the Act). 

   [15] This Full Court spoke in Whitford of “such matters as” the “length of delay, the reasons for the delay and prejudice occasioned the respondent by reason of the delay and the strength of the applicant’s case and the degree of hardship which would be suffered unless leave were granted”.  All of those matters were said by the Court to be “matters which affect the exercise of the discretion”.  Yet, this Court was at pains there to point out that those considerations were not exclusive of the matters to be considered in the exercise of the broad discretion; an overall requirement to do justice between the parties is the ultimate criterion.  The strength or weakness of, or the relative weight to be attached to, those various matters in the exercise of the discretion must necessarily depend on the facts of the particular case.  This court said explicitly in Whitford that “these matters are not necessarily the only ones”. 

   [3] Ainslee-Wallace, Murphy and Tree JJ

6. The fundamental question in any application of this nature is whether granting an extension of time will do justice between the parties: see Gallo v Dawson[1990] HCA 30; (1990) 93 ALR 479. In Tamaniego & Tamaniego [2010] FamCAFC 254 at [162] O’Ryan J considered a number of authorities and concluded:

   ……… 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.

Evidence

1. I do not propose canvassing the evidence of the parties in great detail however some understanding of the evidence they each have given is necessary to determine both the question of hardship and to inform my consideration as to the exercise of discretion.  In doing so I must look primarily at the applicant’s evidence however I do not propose to ignore the evidence of the respondent as it is important to understand the differences in their respective cases.  In Jacenko & Jacenko (1986) 11 Fam LR 341 at 343, (1986) FLC 91-776 Nygh J said:

   ……..[T]he 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 that prima facie case can be established.

2. It is the applicant’s case that the respondent came into the relationship with significant debt totalling around $60,000, which was eventually paid out from drawing down on their joint mortgage.  She said the respondent’s wages were often garnished by the Australian Taxation Office and the Child Support Agency, and for a three year period he only contributed $600 a fortnight to the property and the cost of living.  The evidence suggests that when they commenced living together the respondent had significantly greater superannuation than the applicant.  His evidence was that he had around $140,000 and the applicant had $23,000 in their respective funds. 

3. In 2001 the parties jointly purchased their home at (omitted) for $155,000.  They obtained a mortgage of $132,200 to fund this purchase.

4. The applicant’s case is that she made greater financial and non-financial contributions during the relationship including:

   a)$32,000 towards the deposit of the joint home;

   b)Greater gross income of over $110,000;

   c)Payment of the respondent’s personal debts of around $50,800 by refinancing the joint property;

   d)Project managing $100,000 renovations on the joint property;

   e)Subsidising the living costs of the respondent’s mother from 2005 to 2011; and

   f)Providing financial assistance to the respondent when his children visited them.

5. The respondent did not concede the applicant made a greater financial contribution.  During the relationship both parties worked and contributed financially to the relationship.  The extent of any greater individual contribution, will be a matter for consideration at the final hearing.  There is no dispute that the respondent made additional contributions to his superannuation fund beyond the compulsory amount and the applicant made the minimum compulsory contributions to her superannuation.  It is the applicant’s case that the parties had agreed that she would make additional payments towards the home loan to enable the respondent to make his additional contributions to superannuation.

6. Both parties allege the other incurred significant personal debts during the relationship and without the knowledge of the other.  The respondent alleged the applicant had a gambling problem during the relationship and that she drew down from the mortgage to meet her gambling expenses.

7. When the parties separated in 2010 the applicant moved out of the former relationship home.  The respondent’s mother was renting the granny flat attached to the property.  Whilst both parties made payments towards the mortgage after separation until the property was sold in 2011, the respondent’s evidence was that he made the greater amount of payments: in excess of $30,000 to the applicant’s $13,000. 

8. The parties initially engaged solicitors to assist them in negotiating a settlement but eventually they negotiated directly.  In 2011 they attended mediation and agreed to sell the former relationship home.  The property sold for $462,500.  After paying out the mortgage, two credit cards in the applicant’s name and one credit card in joint names the sum of $48,450 was held in trust.  In August 2011 this sum was distributed by agreement with the applicant receiving $40,000 and the respondent receiving $8,450.  The respondent retained the household furniture.  No formal or written agreement was entered into between the parties.  They continued to exchange without prejudice correspondence in relation to property settlement up until August 2012.  The applicant said that the respondent moved interstate at this time and she was not able to contact him.  The respondent rejected this assertion.  He said that although the applicant had been sending him correspondence to his old work email address she would have been able to locate him through mutual friends.

9. The applicant claimed that after separation she gave money to the respondent on a number of occasions but her evidence lacked any particularity in relation to this. 

10. In 2012 the respondent received a redundancy package, which included accrued leave.  The applicant argued that some of this leave would have accrued during the relationship.  His current employment contract is due to expire in June 2016.  He asserted that he was uncertain if funding would continue for the program he is currently working on leaving some doubt as to his future employment prospects.

11. The applicant has had a number of medical issues.  Her evidence is that both her physical and emotional health have been compromised after separation.  The applicant has an auto-immune condition and has had iron and vitamin D deficiencies resulting in lethargy, tiredness and a lower auto-immune.  She underwent surgery in September 2011 for the removal of ovarian cysts and further surgery in October 2012 for a hysterectomy.  The applicant also had significant dental issues in 2013.

Hardship

1. The applicant argued that it would be inequitable and unjust to not grant the leave sought given the disparity in the current balances in their respective superannuation accounts.  In support of this argument she relied on her assertion that she made greater contributions to the mortgage during the relationship enabling the respondent to make greater contributions to his superannuation.

2. Although the applicant received a greater share of the proceeds of sale of the former relationship home back in 2011, I am satisfied that she has an arguable case for a property adjustment order when I consider the disparity of their superannuation funds not all of which could be attributable to post separation contributions and fund earnings. I am therefore satisfied that the applicant has established hardship within the meaning of s.44(6). It does not necessarily follow however, that the applicant would be successful in obtaining an order for the amount claimed in her amended application. The extent of any adjustment, if any is a matter that would be determined after a final hearing.

Exercise of Discretion

1. Having found hardship established, I must now turn my mind to whether, in exercising discretion, leave should be granted.  As I have indicated earlier in the judgment a number of factors need to be considered.

2. The delay was some two years after the standard application period.  The parties initially engaged lawyers to conduct negotiations culminating in mediation in the second half of 2011.  Although agreement was reached in relation to the sale of the former relationship home and the division of the proceeds of sale no formal agreement was drafted.  Indeed they continued without prejudice negotiations without the benefit of lawyers for another year.  This would have taken the parties to a few months past the standard application period.  When the applicant found she was unable to contact the respondent after he moved interstate in 2012 she did not bring her application for property settlement.  This would have been the appropriate time for her to do so even if she would still have needed the leave to proceed out of time.

1. I accept however that the applicant has had a number of medical conditions that have had a negative impact on her health both physically and emotionally.  The applicant was also unemployed for a significant period of time after separation and experienced financial difficulties.

2. The respondent accepted that the applicant has had health issues but he did not consider her to have been so debilitated that she would have been prevented from filing her application within time.

3. If leave is granted the respondent will be prejudiced in that he will need to address the ongoing litigation.  There can be no criticism of the respondent in thinking that he was entitled to get on with his life given four years had passed since the parties separated.  In his submissions he argued that he continued to make significant contributions to his superannuation after separation to prepare for his retirement.  He is 10 years older than the applicant.  These issues however are factors that will be taken into account if the court is ultimately persuaded to make a property adjustment order.

4. When I weigh up each party’s case and consider the need to do justice to both parties I am satisfied that the applicant will suffer hardship if the leave is not granted and that she has reasonably explained the reason for the delay.  Although the extent of the delay is significant, on balance I am persuaded that despite the hardship to the respondent in having to address the application, justice would be served by enabling the applicant to argue her case for a property adjustment order.  Accordingly I will grant the leave sought.

I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Judge Lapthorn

Associate: 

Date:  24 February 2015