DEAN & GARNET
[2020] FamCA 4
•10 January 2020
FAMILY COURT OF AUSTRALIA
| DEAN & GARNET | [2020] FamCA 4 |
| FAMILY LAW – PROPERTY SETTLEMENT – Leave to file application out of time – Where the applicant filed an application for property settlement over five years out of time – Where the applicant requires leave pursuant to s 44(6) of the Family Law Act 1975 (Cth) – Where the parties’ de facto relationship lasted for over 20 years – Where the applicant’s contributions were greater than the respondent’s – Where the applicant has a reasonable basis for a valuable claim – Court satisfied that the applicant would face hardship if the leave were not granted – Where the delay in filing was in part caused by the applicant’s significant mental health issues – Where the prejudice that the applicant would face if leave were not granted would be greater than the prejudice to the respondent if leave were granted – Where the granting of leave is warranted in order to do justice to both parties – Leave granted. |
| Family Law Act 1975 (Cth) ss 44, 90SM, 90SF |
| Althaus & Althaus (1982) 8 Fam LR 169; [1979] FamCA 47 Gadzen & Simkin (2018) FLC 93-871; [2018] FamCAFC 21 Hedley & Hedley (2009) FLC 93-413; [2009] FamCAFC 179 Montano & Kinross (2014) FLC 93-623; [2014] FamCAFC 231 Sharp & Sharp (2011) 50 Fam LR 567; [2011] FamCAFC 150 Warby & Warby (2001) 28 Fam LR 443; [2001] FamCA 1469 Whitford & Whitford (1979) FLC 90-612; [1979] FamCA 3 |
| APPLICANT: | Mr Dean |
| RESPONDENT: | Ms Garnet |
| FILE NUMBER: | SYC | 2355 | of | 2018 |
| DATE DELIVERED: | 10 January 2020 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Loughnan J |
| HEARING DATE: | 3 & 4 December 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Stapleton |
| SOLICITOR FOR THE APPLICANT: | Sydney Law Group |
| SOLICITOR FOR THE RESPONDENT: | Browns the Family Lawyers |
Orders
The application for leave pursuant to s 44(6) of the Family Law Act 1975 (Cth) to bring proceedings out of time, contained in the Amended Initiating Application filed 4 March 2019 is granted and the Amended Initiating Application is deemed to have been filed pursuant to that leave.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Dean & Garnet has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC2355 of 2018
| Mr Dean |
Applicant
And
| Ms Garnet |
Respondent
REASONS FOR JUDGMENT
Introduction
Mr Dean (“the applicant”) commenced proceedings in this Court seeking orders for property settlement arising out of the breakdown of his de facto relationship with Ms Garnet (“the respondent”). It is common ground that the application was filed more than two years after the date of final separation and accordingly, the applicant requires leave pursuant to s 44(6) of the Family Law Act 1975 (Cth) (“the Act”) to bring those proceedings. The applicant’s application for leave is the subject of these interlocutory proceedings. The respondent opposes the granting of leave.
The application for leave is granted. What follows are the reasons for that decision.
Applications
Relevantly, the applicant seeks the following interlocutory orders in his Amended Initiating Application:
1.That pursuant to Section 44(6) Family Law Act 1975, the Applicant is granted leave to institute proceedings out of time for the alternation of the property interests of the parties pursuant to section 90SM of the Family Law Act.
2.That in the alternative to Order 1, the Court determine that this is a matter which attracts accrued jurisdiction to determine the equitable claims made by the applicant against the respondent with respect to the properties at B Street, Suburb C in the State of New South Wales and being Lot … in Building Unit Plan …, title reference … ('the Suburb C property'): and Unit at D Street, Suburb E NSW ('the Suburb E property');
3.Until further order, the Respondent is restrained from executing any documents transferring her interest to any person or entity in the properties located at:
A.The Suburb C property; and
B.The Suburb E property.
4.That until further order, the Respondent is restrained from executing any documents which increases the mortgages secured over the properties located at:
A.The Suburb C property; and
B.The Suburb E property.
5.That within 7 days, the Applicant is to lodge a caveat over the Suburb C property and the Suburb E property.
6.That the Respondent pays the Applicant’s costs of and incidental to this application.
The orders sought at paragraphs (2), (3), (4), and (5) were not pressed on behalf of the applicant.
The respondent opposes the application and in her Case Outline document provided to the Court on 28 November 2019, states that she order she seeks are:
1.That the interim application contained in the Initiating Application filed 16 April 2018 be dismissed.
2.That the Initiating Application filed 16 April 2018 be dismissed.
3.Costs.
Written Evidence
The applicant relied on:
·Amended Initiating Application filed 4 March 2019;
·Financial Statement filed 16 April 2018;
·Affidavit of the applicant filed 28 October 2019;
·Affidavit of the applicant filed 24 November 2019; and
·Affidavit of Dr F filed 26 November 2019.
The respondent relied on:
·Response to Initiating Application filed 4 May 2018;
·Financial Statement filed 4 May 2018; and
·Affidavit of the respondent filed 24 June 2019.
The Hearing
The hearing was originally listed over three days commencing on 3 December 2019. With the cooperation and forbearance of the parties and their lawyers, the hearing was concluded on 4 December 2019, when judgment was reserved.
Short History
The applicant was born in 1964 and is 55 years of age. The respondent was born in 1962 and is 57 years of age. The parties met while they were students in 1988 and commenced cohabitation on 14 February 1989. It is common ground that the parties were in a de facto relationship for many years, however the date of separation is a contested issue. The applicant’s case about separation was something of a moveable feast but I understood that he ultimately contended that final separation was in 2012. The respondent asserts that separation occurred on or before 28 February 2011. In the normal course of property settlement proceedings the date of separation is often not very relevant as the focus is usually on contributions and contributions can be made before and after separation. However, in proceedings for leave under s 44(6), the time of final separation is relevant to the question of delay.
Credibility
It is sometimes necessary to make assessments of the credit of witnesses where findings of fact are required on disputed issues and there is no reliable corroborative evidence. In those circumstances and where one witness is to be preferred over another, the Court is obliged to provide reasons for that finding. A person can be an unreliable witness for many reasons, including that they do not have a reliable memory, they have given inconsistent versions of a particular fact or incident or they had only a limited opportunity to witness the event in question. For whatever reason, some individuals are simply not reliable witnesses.
On his own testimony, the applicant was a poor witness. In many instances during cross-examination he did not answer the question asked of him or gave an abrupt response rejecting the question. At one point the applicant categorically rejected a proposition to the effect that there were differences between his capacity to function professionally and in his personal life. As he immediately thereafter conceded, that proposition was the very evidence he sought to give. At one point the applicant said that he had a poor memory and that was consistent with difficulties he had in cross-examination with some events he had deposed about in his affidavit. Of course, the applicant has had a long struggle with mental health issues, including two decades of treatment for depression, three periods of hospitalisation for Bipolar disorder in 2012 and regular treatment with Dr F since then.
On his own evidence the applicant was careless in completing some documents. The applicant could not explain why he had deposed in his Initiating Application and an Amended Initiating Application that he and the respondent separated in 2015 when he says that they separated in 2012. In relation to comments he made in paragraph 49 of his affidavit the applicant said something to the effect that he was not functioning well at the relevant time. I took his evidence to be that his reported apprehension at that time was likely to be wrong. The applicant repudiated the deposition in his Financial Statement that he holds 100 percent of the shares in G Pty Ltd.
Dr F gave evidence as a treating expert and there was no challenge to his credit.
The respondent was a good witness. Her cross-examination was characterised by her conceding virtually every proposition put to her.
Background Facts
The parties met in 1988 while studying at university.
The parties commenced cohabitation on 14 February 1989 at rental accommodation in Suburb H, New South Wales.
The applicant was admitted to practice as a lawyer in 1993 and he says that his salary increased to about $50,000 and then $70,000 by June 1995. The respondent received a salary of about $40,000 per annum upon completion of her university studies.
In 1994 the parties purchased a property at J Street, Suburb K (“the Suburb K property”) for $209,000. The parties borrowed from the ANZ Bank and the deposit, legal fees and stamp duty were derived from a $30,000 compensation payment that the respondent received as the result of a knee injury.
Around this time the parties established a joint bank account (“the joint account”). The respondent says that she transferred her income into the joint account and continued to do so until 2005. The applicant asserts that he did the same and the respondent agrees, although she is unsure whether it was the entirety of the applicant’s income or just some part of it. The parties used the funds to pay for day to day expenses and the outstanding mortgage.
The applicant says that in June 1995 he commenced a new job as a lawyer with an annual salary of $90,000. He says that the entirety of his salary was transferred into the joint account.
The applicant says that between June 1995 and October 2000 his salary increased to approximately $250,000.
In around 1999 the respondent suffered major work-related depression and was unable to work from about 2000. She received worker’s compensation payments from 2000 to 2002 valued at about $70,000 and she says that she subsequently paid that amount into the joint account.
In or about August 1999 the parties sold the Suburb K property and purchased a property located at B Street, Suburb C (“the Suburb C property”), for $455,000 as joint tenants. The parties took out a mortgage with the National Australia Bank (“NAB”). The applicant contends (and the respondent denies) that he applied $100,000 of personal savings towards the balance. The respondent says that the entirety of the proceeds of sale of the Suburb K property were applied towards the purchase.
The respondent says that the parties were not sexually intimate once they moved into the Suburb C property and that their relationship thereafter was more one of companionship with little intimacy or physical affection.
In late 2003 the applicant opened an office of the law firm in which he was employed, in Brisbane. The parties agreed that the applicant would live and work in Brisbane and return to Sydney on weekends and holidays. The applicant says that he continued to deposit his wages into the joint account and the funds continued to be applied to the mortgage, living expenses and for the respondent’s occasional travel to Brisbane. Fulltime cohabitation ceased at this point.
In around 2005 the respondent undertook some work for the applicant at his legal firm. The applicant says that she was paid $5,000 for it.
In May 2005 the applicant established an incorporated legal practice (“ILP”). There were two other shareholders who contributed expertise and assisted with obtaining capital and although the head office was in New South Wales, they practiced predominantly in Queensland.
In June 2005 the applicant commenced trading as an ILP.
In July 2005 the applicant transferred his interest in the Suburb C property to the respondent for $1. Both parties say that the transfer was in the nature of asset protection but they disagree about which of them was being protected. The respondent deposes to saying words to the following effect to the applicant:
I need you to transfer your interest in Suburb C to me. I don't want to lose Suburb C because of your gambling and reckless financial decisions. I need this to protect me from you; and
If you are going to start a practice up there [Brisbane] and you are confident that it will be successful, that yours. I don't want to make any claim against that. But I need to protect my home.
She says that the applicant replied:
Well, if that's going to make you feel better about things, that's what we'll do. I will always support you financially.
At this point in time the parties also applied to refinance their loans with the NAB. The parties also had access to an overdraft facility (which the applicant refers to as a “floating charge”) which was being used by the parties to fund expenses. Upon the refinancing of the loans, the overdraft facility increased to $300,000.
In about 2005 the parties purchased $20,000 in shares in the name of the respondent.
Between 2005 and 2012 the applicant rented a number of units in L Town, New South Wales. He says that the respondent visited and stayed at those units with him, that they slept in the same bed, remained intimate and continued their relationship. On the other hand the applicant conceded in cross-examination that between the middle of 2011 and September 2012 the parties did not see each other. The respondent agrees that she visited the applicant in L Town but asserts that they slept in separate bedrooms, were not intimate and that their relationship was more accurately characterised as a friendship.
Since 2005 and until present date the respondent asserts that she has been making payments in relation to mortgages and other outgoings to the Suburb C property.
The respondent asserts that from 2006 until 2010 the frequency of her visits to L Town reduced and that the applicant’s erratic behaviour made her reluctant to spend time in his company.
The applicant says that he was income splitting with the respondent until April 2012. He says that their wages were paid into the joint account and continued to be applied to their living costs.
In or about 2007 the parties purchased an investment unit in Suburb E, New South Wales (“the Suburb E property”) for approximately $271,000. It was in the respondent’s sole name, which the applicant says was for asset protection. Funds from the overdraft facility were used for the deposit and costs of sale, including stamp duty and legal fees. There was a mortgage of $808,000 and the Suburb C property was used as collateral. The parties did not live at the property and it was always tenanted and the rental income covered the majority of the mortgage repayments and outgoings. The balance was paid out of the overdraft facility (according to the respondent) or from the applicant’s earnings (according to the applicant). The respondent asserts that she continues to pay the associated mortgage and outgoings to present date.
The respondent says that the parties took a trip to Western Australia in May 2010 in an attempt to resurrect their relationship. Although she allows a possible later date in her case, the respondent says that this was the point when, in her mind, the relationship was over.
In October 2010 the respondent travelled to Asia. She says that this was intended to be a low-cost holiday with mutual friends but that the applicant did not join the trip as initially planned because their relationship had broken down. The applicant contends that at no point did the respondent tell him that the parties had separated and that when he picked her up from the airport upon her return, their relationship continued as normal.
Between 3 April 2012 and early May 2012 the applicant was an involuntary inpatient at the M Town Hospital when he was scheduled under the Mental Health Regulation 2007 (NSW). He was diagnosed with Bipolar disorder, the symptoms of which were apparently worsened by anti-depressant medication he had been taking for 20 years. The applicant says that he was very ill and completely lost touch with reality.
Following his discharge from the hospital, the applicant says that he experienced heightened mania and did not sleep for almost two weeks. One day in May 2012 he started to drive to Suburb C and spoke to the respondent on the phone when he got to N Town and she told him to go back to the hospital. Thereafter, on 22 May 2012, the applicant was again scheduled and admitted to M Town Hospital. The applicant says that around this time one of his business partners wound up the ILP without his knowledge.
The applicant was discharged from M Town Hospital in June 2012 and was transferred to O Town Hospital as a voluntary patient. Prior to his discharge, the applicant was granted a disability support pension from Centrelink and was paid about $420 per week plus a rental allowance.
On 9 August 2012 the applicant was discharged from the O Town Hospital and took up residence in a supported accommodation facility. He was discharged into the care of a psychiatrist, Dr F and has continued to be treated by Dr F to this date.
Between late August 2012 and May 2013 the applicant resided in student shared accommodation in Brisbane. The applicant says that between August and December 2012 he mostly slept and remained socially isolated, leaving his bedroom only when necessary. He says that he occasionally spoke to the respondent while living there. On one occasion he asked “Can I come home?” and she said “No, you can’t”.
In late 2012 the applicant again asked the respondent if he could return to the Suburb C property. She said words to the effect that he could not and she sent some of his belongings to him in Brisbane.
The applicant says that in late 2013 or early 2014 the parties spoke about dividing their assets. He said words to the effect of “I’m not up for tackling it just now” to which the respondent allegedly responded “Contact me when you’re feeling better and we can work something out”.
On 7 January 2013 the applicant commenced employment in administration. He says that until late 2013, he paid $2,000 per month to the respondent to assist with the mortgage. He says that he did so with the belief that the parties’ relationship was ongoing but that the respondent did not want him to return home until his mental health stabilised.
In February 2014 the respondent resumed working full time, taking up two part-time jobs. She says that she sacrificed most of her salary to build up her superannuation.
Between May 2014 and November 2014 the applicant worked as a lawyer. He says that despite being at work, he continued to struggle to manage the demands of the role as well as his mental health. He says that he believed that the respondent would talk to him about property settlement once he was able to mentally cope. He says he did not think that was any rush to get legal advice and says that he was not aware of any limitation period.
The respondent says that the applicant posted on Facebook on 1 June 2014 indicating that he was in a relationship with another person, who the respondent understood to be Ms P. The applicant’s evidence is that he was in a stable relationship with Ms P by 2017 (but he does not say when the relationship commenced).
In December 2014 the applicant was accused of assaulting a colleague at the legal firm that he was employed at. The application was ultimately not pressed and the colleague was eventually convicted of making a false declaration and was sentenced to six months imprisonment. Despite the fact that the charge was withdrawn, the applicant says that this caused him extreme distress and his employment was ultimately terminated.
In February 2015 the applicant established his own legal practice in Queensland.
On 2 March 2015 the applicant sent the respondent an email about their assets and a further email on 10 March 2015. The respondent asserts that she responded by way of a phone call wherein she said:
I’ve seen a solicitor and I have also googled the rules on this. I don’t know why you’re doing this now. I thought this was all sorted years ago. You are out of time to make any application to the court, you should know that.
The applicant allegedly replied “Okay – all right. Leave it with me, I will talk to some friends in this area and I will get some advice.”
The applicant denies that the respondent brought the time limit to his attention at this point in time. He says that ultimately, he did not commence proceedings as he believed that the parties would talk through the issues and sort them out amicably and asserts that he was still unaware of the limitation period.
In late 2016 and 2017 two lawyers made complaints about the applicant’s behaviour to the Office of the Legal Services Commissioner. His conduct was investigated and his practising certificate was at risk of being cancelled.
In September 2017 the applicant appointed Mr Q as director of his firm. He says that this allowed him to remove significant stressors from his day to day life as the demands of managing the legal practice alongside his mental health issues was overwhelming.
Ultimately the applicant incorporated G Pty Ltd to trade as G Legal. A friend, Mr R, invested $545,000 in the company over time and in early 2018 he took 25 percent of the equity in the firm. The applicant later borrowed a further $25,000 from Mr R. Sadly Mr R subsequently died.
The applicant says that in late 2017 he mentioned his personal history to a barrister whom he was working with on a settlement conference. The barrister suggested he contact a family lawyer and the applicant asserts that this was the time when he realised that there may be a time limit for family law proceedings.
On 15 December 2017 the applicant caused his solicitors to write to the respondent regarding property issues. A response was received on 16 January 2018.
On 16 April 2018 the applicant commenced proceedings for property settlement in this Court.
The applicant continues to see his psychiatrist, Dr F, in relation to his mental health issues.
The Law
The approach to granting leave for an out of time application
Section 44 of the Act relevantly provides as follows:
(5)Subject to subsection (6), a party to a de facto relationship may apply for an order under section 90SE, 90SG or 90SM, or a declaration under 90SL, only if:
(a) the application is made within the period (the standard application period) of:
(i) 2 years after the end of the de facto relationship
(ii)12 months after a financial agreement between the parties to the de facto relationship was set aside, or found to be invalid, as the case may be; or
(b) both parties to the de facto relationship consent to the application.
………………..
(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
…………
While the date of separation is contested between the parties, it is an agreed fact that the de facto relationship came to an end more than two years before the applicant commenced proceedings for property settlement. Given that the respondent does not consent to the application, in order to grant leave, the Court must be satisfied pursuant to s 44(6) of the Act that to not grant leave to institute proceedings would cause hardship to the applicant.
In Gadzen & Simkin (2018) FLC 93-871 the Full Court of this Court confirmed that the two-step process identified in Whitford & Whitford (1979) FLC 90-612 in the context of s 44(3) proceedings was equally applicable to those seeking leave under s 44(6). The Full Court stated:
[29]The statutorily expressed requirements for the grant of leave in s 44(3) of the Act are in identical terms, for all practical purposes, as those requirements with the grant of leave under s 44(6). It follows that authoritative pronouncements as to the principles applicable to the operation of s 44(3) apply equally to s 44(6). In Whitford & Whitford[1] the Full Court stated:
Thus, on an application for leave under sec. 44(3), two broad questions may arise for determination. The first of these is whether the Court is satisfied that hardship would be caused to the applicant or a child of the marriage if leave were not granted. If the Court is not so satisfied, that is the end of the matter. If the Court is so satisfied, the second question arises. That is whether in the exercise of its discretion the Court should grant or refuse leave to institute proceedings.
[1] (1979) FLC 90-612, 78,144 (“Whitford”).
Accordingly, the approach to be taken is to firstly determine whether hardship would be caused to the applicant if leave were not to be granted. The question of whether it is appropriate in the present circumstances for the Court to exercise its discretion in allowing the application to proceed need only be considered if the applicant has satisfied the Court of the question of hardship.
Hardship
In Gadzen & Simkin (2018) FLC 93-871 the Full Court drew upon the authorities of Sharp & Sharp (2011) 50 Fam LR 567 and Edmunds & Edmunds (2018) FLC 93-847 as follows:
[35] In Sharp the plurality of the Full Court observed:
17.It is well-accepted that hardship for these purposes is more than the loss of a right to commence proceedings. It is the consequences attending the loss of the right to commence proceedings that constitutes hardship. That is a matter to be determined by the circumstances of the particular case.
18.In assessing hardship in this context the well-established test is that the applicant must have a prima facie claim worth pursuing or a “real” probability of success. Further, leave will not be granted if to do so would not, in the substantive result, alleviate that hardship. However, whether or not hardship exits is not to be assessed only by reason of the monetary value of the probable order to be made if leave were granted.
[36] In Edmunds the Full Court recently cited with approval the judgment in Sharp and said:
47.As the Full Court pointed out in Sharp at [18], “the well-established test is that the applicant must have a prima facie claim worth pursuing or a ‘real’ probability of success. Further, leave will not be granted if to do so would not, in the substantive result, alleviate that hardship”.
48.That involves 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.
[37]It follows from these authorities that 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.
Furthermore, the recent Full Court decision of Emmert & Quarto [2019] FamCAFC 208 discussed the issue of hardship in the following terms:
[51]It is well accepted that hardship of the relevant kind is not a measurement of the loss of the right to commence proceedings but the consequences of that loss. In considering whether an applicant for leave has established the necessary hardship, a court must determine whether the applicant has a “prima facie claim worth pursuing” or, put another way, “a real probability of success” in the contemplated proceedings.[2] Nevertheless, that determination is not the end of the necessary consideration because leave will not be granted if to do so would not, in the ultimate result, alleviate the identified hardship.[3]
[2]Sharp & Sharp (2011) 50 Fam LR 567 at [18] (“Sharp”).
[3] Sharp at [18]; Hedley & Hedley (2009) FLC 93-413 at [131]; Whitford & Whitford (1979) FLC 90-612,78, 144.
Therefore, I must consider whether the potential claim put forward by the applicant is not only likely to succeed, but whether its success would actually alleviate the hardship that the applicant faces if leave were not granted.
Does the applicant have a reasonable probability of success?
While I am not to determine the ultimate outcome of the applicant’s claim for property, it is sensible that I weigh it against the relevant legislation to form a view about the perceived strength of the claim in order to assess whether there is a “real probability of success” as outlined in the authorities referred to above.
Once a geographical requirement in s 90SK has been met, applications for property settlement between parties to concluded de facto relationships are determined by reference to s 90SM. That section requires that the Court find that it is just and equitable that there be an order altering the property interests of the parties. The section also requires that any order altering such interests be just and equitable by reference to the considerations set out in s 90SM(4). In accordance with long accepted practice, the approach to property settlement firstly involves identifying the current assets and liabilities and the way in which they are held.
The balance sheet
I was provided with no balance sheet by the parties. I will do the best I can with the parties’ Financial Statements.
It is common ground that the properties at B Street, Suburb C and D Street, Suburb E are held in the sole name of the respondent. Apart from an asserted 50 percent interest in each of the properties at Suburb C and Suburb E, the applicant deposes to having $1,838 in an ANZ account in his own name, and household contents valued at $1,000. He says that he has a superannuation interest with Super Fund 1 worth $265,000. In his Financial Statement the applicant deposes that he owns all of the shares in G Pty Ltd but he values the shares at “nil”. I understood the applicant to say during cross-examination that 25 percent of the shares were held by his friend and investor, Mr R, and following his recent death, those shares are now held by his estate. I understood the applicant to also say that some or all of the remaining shares in the company had been transferred to his partner, Ms P, and that he holds no shares. The applicant says that he owes $200,000 to G Pty Ltd by way of a director’s loan.
The respondent deposes to owning the properties at Suburb C and Suburb E, which she values at $1,900,000 and $275,000, respectively. She has $93 in an NAB account, $24,234 worth of Company 1 shares and $28,887 worth of Company 2shares. The respondent estimates that her household contents have a value of $17,500. She has $186,157 in Super Fund 2. She owes $168,508, $154,673 and $240,000 on loans secured by mortgages on one or both of the properties.
Therefore the assets and liabilities of the parties look like this:
Respondent’s assets and liabilities
Owner Description Respondent’s value Applicant’s value 1 Resp. B Street, Suburb C $1,900,000 $1,700,000 2 Resp. D Street, Suburb E $275,000 $290,000 3 Resp. NAB account $93 4 Resp. Company 1 shares $24,234 5 Resp. Company 2 shares $28,887 6 Resp. Household contents $17,500 7 Resp. Super Fund 2 $186,157 8 Resp. Mortgages * 3 -$563,181 $1,868,690
It is odd that the applicant asserts that he has an interest in the Suburb C and Suburb E properties but asserts no responsibility for the debts secured by those properties. Although the applicant apparently asserts different values for the real estate to those asserted by the respondent, I was taken to no evidence to support his contention and the respondent was not challenged about her evidence. In any event, within the narrow compass of these proceedings, the range of dispute about the real estate values is not significant.
Applicant’s assets and liabilities
Owner Description Respondent’s value Applicant’s value Applic. G Pty Ltd NK $0 Applic. ANZ account $1,838 Applic. Household contents $1,000 Applic. Super Fund 1 $265,000 Applic. Directors Loan - G Pty Ltd -$200,000 Total $67,838
There was some cross-examination of the applicant about the value of G Pty Ltd. The issue arises because of the applicant’s evidence that in 2017 or early 2018, Mr R took 25 percent of the equity in the firm on the basis of investing $545,000 in the company. That suggests that the company then had a value in excess of $2 million. At or just prior to that time, the applicant held some or all of the remaining shares in the company. The entirety of the applicant’s evidence about the fate of the company and his interest in it is contained in paragraph 104 of his affidavit which reads:
104.I have had to downsize my practice as the day to day demands of practice continue to adversely affect my mental health. I now operate my business from home and employ one lawyer and one part time secretary. I have had to sell the files from my practice as I have been unable to complete them following the death of Mr R and to pay for these proceedings.
Suffice it to say, that is a far from adequate explanation for the loss of an asset apparently worth something of the order of $1.5 million. There was reference during the hearing to a boom and bust cycle of the applicant’s financial affairs. For example there is reference to T Pty Ltd having a notional value of $10 million at one point.
On the parties’ evidence, their assets have a net value of $1,936,528 with the respondent holding about 96.5 percent of them.
Direct and indirect financial contributions under s 90SM(4)(a)
Section 90SM(4) of the Act sets out the factors to be taken into account by the Court when determining what orders, if any, should be made in relation to property settlement. In about 1995 the parties purchased the Suburb K property. It is agreed that the $30,000 compensation payout received by the respondent as the result of a knee injury was directly used to fund the deposit and associated costs.
The applicant asserts that he applied $100,000 in personal savings towards the purchase of the Suburb C property. This is disputed by the respondent.
The parties each depose to depositing some or all of their incomes into the joint account, which was then used for day to day expenses and to pay off the parties’ mortgages. For the applicant’s part, this amount was $90,000 in 1995 and then increased to $250,000 thereafter. In around October 2000 when he commenced working with a law firm, he says this amount was $150,000 and increased to $310,000 gross by 2003.
The applicant was a regular gambler. He was asked in cross-examination, how much he gambled and responded to the effect: “Hundreds of thousands of dollars. $200,000, could be $400,000.” I have not recorded any indication of the period over which those estimates applied. Perhaps the applicant intended to say that was his total gambling expenditure. The respondent’s evidence[4] about his advice to her on 13 July 2009 wherein he estimated that he had probably spent $5 million in gambling over the previous 27 years, was repudiated by him as an exaggeration. He said that he did not earn $5 million over that time, let alone gamble it and that when he made that assertion he was sick, it being a symptom of Bipolar disorder.
[4] Paragraph 65 of the respondent’s affidavit
As the applicant made plain, for much of the relevant period, his was the only income of the relationship and because it was a substantial income for periods of time, he was able to meet all of the parties’ outgoings and to provide a comfortable lifestyle for them, notwithstanding his gambling. Nevertheless, it is more probable than not that there was significant waste of the resources of the parties’ relationship through the applicant’s gambling.
The respondent set out her assessed taxable income for certain years in her affidavit. The effect of the disclosure is as follows:
1995$26,617
1996$27,510
1997$31,172
1998$32,259
1999$29,916
2000
2001$30,174
2002$17,088
2003
2004
2005
2006
2007$21,352
2008$51,849
2009$29,690
2010$73,439
2011$132,557
2012$34,258
2013$12,261
2014$20,462
2015$18,908
2016$21,114
2017$19,554
I have referred to the respondent receiving $30,000 in compensation which went to the purchase of the Suburb K property. It is the respondent’s evidence that she suffered from major depression from about 2000. She says that she did not have gainful employment from about 2000 until 2006. She received workers compensation payments in 2001 and 2002 and then a payout of $70,000. She says that the only work she recalls doing from approximately 2006 to 2010 was work related to the applicant’s legal firm (T Pty Ltd). I understood there to be a concession in the case that at least some of the respondent’s income during that period came by way of splitting the applicant’s income. On those facts it is difficult to quantify the income of the respondent from paid employment. The evidence suggests that, worker’s compensation aside, the respondent did not make contributions by way of salary or wages over the period from 2000 to 2010, save for some casual or part-time employment through the applicant’s firm. I understand it to be an agreed fact that the applicant had a significantly higher income than the respondent. It follows that his financial contributions outweighed those of the respondent.
Direct and indirect non-financial contributions under s 90SM(4)(b)
The respondent says that she attended to minor household repairs and performed cosmetic work around the house. She also did a number of DIY projects such as renovating second hand furniture items. Together, the parties painted some of the rooms in the Suburb C and Suburb K properties.
The applicant worked to develop/establish T Pty Ltd and G Pty Ltd. In the ultimate, the applicant would say that those projects provided no capital return but they generated income.
Section 90SM(4)(c): Homemaker contributions
There were no children of the relationship.
Although the parties lived in separate homes once the applicant established his legal practice in Queensland, the respondent asserts that she made significant homemaker contributions throughout the years that the parties did live together. She says that although they had assistance from a cleaner who would attend the property on a fortnightly basis, she would usually do the following household chores: cooking, washing up, laundry, cleaning the toilets and bathrooms, sweeping, mopping and vacuuming, minor household repairs, gardening, and grocery shopping.
Conclusion about contributions
Albeit that this was a truncated hearing about leave, on the presented facts the applicant can point to a substantial contributions-based entitlement. Subject to the issue about gambling, the applicant identifies a case for half or more of the assets, based on contributions alone.
Adjustments
Section 90SM(4)(d): The effect of any proposed order on the earning capacity of either party
I have not been taken to any relevant submissions on this issue.
Section 90SM(4)(e): Relevant matters in s 90SF(3)
(a) the age and state of health of each of the parties to the de facto relationship
The applicant and respondent are aged 55 years and 58 years respectively. The parties have each had longstanding mental health issues.
The applicant has suffered extensive mental health issues for many years. He was treated for depression for 20 years and in 2012 he was hospitalised and diagnosed with Bipolar disorder. He continues to receive treatment from Dr F, a psychiatrist, for that disorder. It is likely that the applicant’s conditions have impacted on his behaviour while working as a lawyer and have caused him to be the subject of complaints to the relevant professional body.
The respondent has been treated for depression and was unable to engage in paid employment for several years.
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
The applicant is a qualified legal practitioner and has many years of experience in practice.
The applicant’s income is $80,000 per annum but I understand his evidence to be that some part of that is reflected in a growing director’s loan. His 2018 Financial Statement puts his wages at $384 per week.
Like the applicant, the respondent has a legal qualification but she has an average weekly income of $1,157 as a vocational trainer.
(c) whether either party has the care or control of a child of the de facto relationship who has not attained the age of 18 years;
This does not apply.
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain;
(e) the responsibilities of either party to support any other person;
I have not been taken to any information regarding this.
(f)subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia, and the rate of any such pension, allowance or benefit being paid to either party;
The applicant was granted a rent allowance and a disability support pension by Centrelink in 2012 after spending time in hospital for mental health issues. It is unclear whether he is still in receipt of such payments.
(g) a standard of living that in all the circumstances is reasonable;
The parties enjoyed some domestic and overseas travel and would each hope to have a comfortable standard of living in the future.
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income;
This does not apply.
(ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant;
This does not apply.
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
This does not apply.
(k) the duration of the de facto relationship and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
Nothing comes to attention here.
(l) the need to protect a party who wishes to continue that party's role as a parent;
This does not apply.
(m) if either party is cohabiting with another person — the financial circumstances relating to the cohabitation;
The applicant cohabits with Ms P who reportedly earns about $500 per week. The respondent’s de facto partner, Mr S, reportedly has an average weekly income of $2,922. Otherwise no relevant submissions have been made on this matter.
(n) the terms of any order made or proposed to be made under section 79 in relation to the property of the parties
Nothing comes to attention here.
Conclusion
There were no specific submissions about potential adjustments. Matters that would be relevant to potential adjustments would include the outcome deemed appropriate by reason of the parties’ contributions, the current income position of the parties and of their partners and the state of health of the parties.
Again, the applicant can point to a valuable claim for property settlement. A claim that is likely to exceed the cost of litigation. The cost advice letters reveal that the parties have spent of the order of $40,000 each to date. The applicant’s claim could reasonably be for an equal division of the relationship pool.
Hardship
In my view the applicant has demonstrated that he would suffer hardship if not granted leave. The identified pool is in excess of $1.9 million and the parties’ relationship spanned 22 years. In terms of the preliminary inquiry under s 90SM(3) it would be just and equitable to change the parties’ interests in property from the current situation which has the respondent holding $1,868,690 and the applicant $67,838. Depending on the contributions based entitlements, the applicant might anticipate a substantial adjustment.
Is the hardship that the applicant faces able to be alleviated by the orders he seeks?
The hardship faced by the applicant could be alleviated by the orders he seeks.
Conclusion
I find that that the applicant would suffer hardship if he is not granted leave to bring property settlement proceedings out of time.
Discretionary considerations
Discretion
Given that I am satisfied that the applicant would experience hardship in the relevant sense if leave is not granted, it is necessary to turn to discretionary considerations.
In Montano & Kinross (2014) FLC 93-623 the Full Court said the following in relation to discretion:
[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”.
(Emphasis in the original)
Prejudice to the parties
As was submitted by the learned solicitor on behalf of the respondent before me, as to the competing prejudices, the Full Court in Sharp recorded:
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 JA 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 conclusively, against the grant of an extension of time. It does not follow that in the absence of prejudice (other than general prejudice) and unlikelihood of a fair trial it will be just and reasonable to grant an extension of time.
There is the potential for prejudice to each party in this instance. The prejudice to the applicant is similar to the question of hardship. If he is not granted leave the applicant is unable to argue for a valuable claim.
As to the respondent there is the presumed prejudice referred to in Sharp above. The respondent made certain decisions such as paying the majority of her income from a second job directly into superannuation and subsequently leaving that job, which she says she would not have done had she known that the applicant was going to pursue a claim against her. I accept that some prejudice flows on from this, although I do note that she left her second job in 2017, by which time the applicant had made some reference to a potential property claim.
Furthermore, there would be some potential redress for the respondent if the applicant’s claim proves to be insubstantial. That could occur, for example, if there was found to be a “boom” in his financial circumstances by the time the proceedings came on for hearing. In the event that the applicant was substantially unsuccessful in his claim because of him holding assets of similar or greater value than those held in the name of the respondent, then that could be addressed in costs.
In my view, the prejudice that the applicant stands to face due to the loss of the right to pursue a valuable claim is greater than that which is anticipated by the respondent.
Delay
As to there being a reasonable explanation for delay - as is referred to above, the date of separation is not agreed. In proceedings for leave under s 44(6), the time of final separation is relevant to the question of delay. The applicant’s evidence about separation was something of a moveable feast. In his Initiating Application and Amended Initiating Application he asserted that separation occurred in 2015. During cross-examination he was not able to point to the circumstances that supported that contention. Notwithstanding what was asserted in those applications, the applicant’s case was opened and conducted on the basis that final separation was in September 2012. The respondent asserts that separation occurred on or before 28 February 2011. There is objective support for the respondent’s contention that separation was earlier than September 2012. In a treating practitioner’s report prepared for these proceedings Dr F reported that the applicant and respondent separated in 2009[5]. The applicant was asked about that and denied that he had told Dr F that he separated in 2009. Dr F did not commence treating the applicant until 2012. Therefore the comment in Dr F’s report is likely to have been sourced in something he read or was told by the applicant. It leaves open that the reference was to something short of a final separation.
[5] Report dated 4 April 2019, at the top of page 10 of the exhibits to Dr F’s affidavit sworn 26 November 2019.
The question of separation is complicated by the fact that the parties ceased to live together in 2003. In that year the applicant commenced working in Brisbane, while the respondent remained in the Suburb C property. In 2005 the applicant moved to L Town on the North Coast of NSW. The parties visited each other with reducing frequency. There were two occasions when the applicant flew to Sydney and may have briefly come into contact with the respondent but otherwise, I understood the applicant to concede that the parties did not see each other between early 2011 and September 2012. During his cross-examination the applicant referred to the situation of fly in – fly out workers in the context of separation. That reference is fairly made. Relationships come in many forms and it is possible for there to be a de facto or de jure marriage where the parties do not live together or rarely do so. For example there are the circumstance of one party being imprisoned, working on an oil or gas rig, on a placement in Antarctica or of some other overseas posting. Without something more, it does not follow that there is a final separation as a result of such circumstances. One would look for a circumstance that marked the transition from an intact relationship to separation.
The evidence in this case does not permit the precise identification of a date of final separation. I am left with the way in which the case was presented and a preference for the evidence of the respondent over that of the applicant. I find that the parties separated not later than 28 February 2011.
The Initiating Application was filed on 16 April 2018. Therefore the application was brought at more than seven years after separation and five years after the time within which the proceedings could have been commenced without leave.
In Althaus & Althaus (1982) 8 Fam LR 169 (“Althaus”) at 77,267 to 77,268 it was held that:
The requirement that the applicant under sec. 44(3) give an explanation of the delay in bringing proceedings in my view requires a consideration of the whole period from the date of the decree nisi to the lodging of the application. It requires the Court to consider whether the wife took all reasonable steps to pursue her claim or whether, on the other hand, she acted at any time as if she had no intention of proceeding or pursuing any claim at all against the husband. It requires the Court to consider whether it can reach conclusions as to why the proceedings were started beyond the time lodged and whether those proceedings are attributable to default on the part of the applicant.
(Emphasis added)
Albeit here in the context of s 44(6), the applicant is obliged to explain why the proceedings were not brought for seven years.
The applicant says that he was very unwell up to and following the date of his discharge from the O Town Hospital in 2012. During cross-examination, Dr F gave evidence that although he was deemed fit enough to be discharged, the applicant was significantly upset by his personal circumstances, that he was isolated and alone and dealing with having lost his career. Dr F considered that the applicant overall still had serious psychological issues that required further work in order for him to be stabilised.
It is the applicant’s case that into 2013 and 2014 he was largely able to function in his work but not in his personal life. Dr F provided a letter to the relevant professional body in support of the applicant renewing his Practising Certificate, indicating that he thought the applicant well enough to return to practicing law. The doctor said during cross-examination that he supported the applicant getting his career back on track and believed that the applicant could competently work as a lawyer given his extensive experience in the field. He clarified that while he had no doubts about the applicant’s capacity to fulfil his duties as a lawyer, he still had concerns about his emotional and functional capacity and suggested he may be supervised in his practice.
When asked about the applicant’s capacity to take steps to deal with his family law matter in 2013, the doctor clarified that although the applicant may have had the capacity to do so, he was preoccupied with ongoing follow-up with regards to medical treatment, had suicidal ideation and was still struggling to get his life back together.
When the learned solicitor for the respondent put to Dr F the irony of the applicant working as a lawyer yet claiming he was not in a position to lodge any family law paperwork, the doctor accepted that somebody with experience as extensive as the applicant’s may be expected to have a grasp of all areas of law. However, the doctor noted that the applicant practices primarily in another area of law, offering the analogous example of the various branches of medicine and the way in which a doctor in one field might know little about others.
Dr F was emphatic in telling the Court that it would be “absolutely plausible” that the applicant’s emotional isolation, emotionally fluctuating mood, sense of loss and despair and fleeting suicidal thoughts would render him without the ability to address these issues in his personal life, however extensive his experience in the legal field.
In December 2014 the applicant was accused of assaulting a colleague at the legal firm where he was employed. Despite the fact that the charge was withdrawn, the applicant says that this caused him extreme distress and his employment was ultimately terminated.
In late 2016 and 2017 two lawyers made complaints about the applicant’s behaviour to the Office of the Legal Services Commissioner. I understand the applicant’s case to be that he was distracted from attending to his property settlement by those complaints.
The bulk of the applicant’s explanation for the delay rests on issues with his mental health, coupled with an apparent lack of knowledge of time limits for bringing applications of the relevant kind. Even taking into account that the applicant does not practice in this jurisdiction, the applicant is a practising lawyer and in my view, the latter point is a weak argument at best and certainly does not justify a seven year delay in bringing proceedings.
I am left to consider the merits of the argument regarding his mental health. The applicant has had a lengthy and chronic struggle with mental illness, the details of which I have set out above. At various times after separation the applicant’s mental health improved to the extent that he was able to resume work as a lawyer. However, I accept the proposition put forward by the applicant and supported by Dr F’s evidence that there can be a difference in one’s capacity to function in a professional capacity and in one’s personal life. It is entirely possible that the applicant was well enough to return to work but not yet in a position to grapple with the challenges associated with his own family law proceedings. In my view, the nature and extent of the applicant’s mental health issues lends itself to a finding in favour of granting leave.
As to the other considerations in Althaus¸ namely whether the applicant behaved in a reasonably diligent manner or whether he acted as if he had no intention of pursuing a claim:
There were communications between the parties in March 2015. The applicant’s evidence is that he did not commence proceedings on the belief that the parties would talk through the issues and sort them out amicably and he asserts that at that stage he was still unaware of the limitation period. The respondent’s evidence is that she advised the applicant of the limitation period. If this is the case then it begs the question of why the respondent would think to mention the time limit to the applicant if she was unaware that he was intending to pursue a claim against her. In my view, the respondent cannot say that she was unaware that the applicant had turned his mind towards a potential property settlement or that he acted as if he had no intention to commence proceedings in the future.
Exhibit 3 is an email from the applicant to the respondent on 8 April 2015 in which the applicant requests the respondent to confirm that the Suburb C property was solely in her name. I have set out earlier in these reasons, some of the other communications made by the applicant to the respondent wherein he has referred to a property settlement. Limited as these communications may have been, it cannot be said that the applicant acted as if he had no intentions or pursuing any sort of claim. The applicant’s conduct in pursuing the claim was inadequate but it was understandable given the specific circumstances surrounding his mental health and personal situation.
The question arises, would it meet the justice of the case if an applicant ignored opportunities to bring proceedings within the required period and at various times after the required period, until he deemed that the respective financial circumstances of the parties favoured a claim or best favoured his interests.
An issue raised on behalf of the respondent was that at least part of the explanation for there being no earlier application by the applicant is likely to be that at various times in the past he knew that the balance of property held by the parties would not justify any adjustment in his favour. Such a circumstance may have pertained when the applicant’s legal firms were successful. I do not recall that proposition being put to the applicant.
In my view the arguments are finely balanced. The applicant has a claim that would be of substance. The applicant has established hardship and the discretion to grant leave is enlivened. The delay was a substantial one. In ordinary circumstances, one might expect that the applicant pursue his case with more diligence than he did. Some of the delay is easily explained in terms of periods of acute mental illness suffered by the applicant in 2012 and thereafter. However, it is likely that there were periods between 2012 and 2018 when the applicant’s condition was chronic rather than acute and he could have more diligently attended to the financial consequences of the breakdown of his relationship with the respondent. It is also possible that there were times during the post separation period where the applicant did not pursue action in respect of property settlement because his financial circumstances may not have justified an application under s 90SM.
In my view, the applicant was placed in a very difficult situation as a result of his struggle with his mental health issues and this led to a lengthy delay between the end of the relationship and his filing of the application.
There would be prejudice to either party depending on the outcome of the leave application. The parties were in a de facto relationship spanning more than 20 years during which the applicant made significant contributions and I have found that he has a valuable claim, worth pursuing. To deny him the right to do so would expose him to hardship that is likely to outweigh the prejudice suffered by the respondent if leave were to be granted. In the complex circumstances of this case, I find that on balance, the justice of the case requires that leave be granted.
I certify that the preceding one hundred and forty-two (142) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 10 January 2020.
Associate:
Date: 10 January 2020
Key Legal Topics
Areas of Law
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Family Law
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Statutory Interpretation
Legal Concepts
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Limitation Periods
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Procedural Fairness
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Remedies
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Statutory Construction
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