G and M - [2005] FMCAfam 145

FEDERAL MAGISTRATES COURT OF AUSTRALIA

G & M

[2005] FMCAfam 145

FAMILY LAW – Property proceedings – application to commence out of time – whether husband will suffer hardship – consideration of discretionary matters.

Family Law Act 1975 (Cth), ss.44, 75, 79

Whitford and Whitford (1979) FLC 90-612 at 78, 144
Hall and Hall (1979) FLC 90-679 78, 627

Applicant:

Respondent:

File Number:

MLM 3119 OF 2002

Judgment of:

Phipps FM

Hearing date:

24 February 2005

Last Submission:

24 February 2005

Delivered at:

Melbourne

Delivered on:

7 April 2005

REPRESENTATION

Counsel for the Applicant:

Mr Indovino

Solicitors for the Applicant:

Collards

Counsel for the Respondent:

Dr Alexander

Solicitors for the Respondent:

Kennedy Guy

ORDERS

The applicant is granted leave to apply out of time on or before the

22 April 2005 for alteration of property interests under s.79 of the Family Law Act 1975 by filing and serving an amended response.
That the property proceedings be heard together with children’s proceedings on 1 December 2005 and that the directions given in the order of the 17 January 2005 apply to the property proceedings.
THAT the parties attend a Conciliation Conference with a Deputy Registrar of the Family Court of Australia at the Melbourne Registry on the 17 June 2005 at 2.15pm.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLM 3119 of 2002

Applicant

And

Respondent

REASONS FOR JUDGMENT

This is an application by the husband for leave to commence property proceedings more than 12 months after the decree nisi dissolving the parties marriage became absolute.
The husband and wife are both aged 38. They were married on

20 November 1993 and separated on 1 February 2001. There is one child of the marriage, D born 8 April 1996 aged eight years.
A decree nisi of dissolution of marriage was granted on 4 April 2002 and became absolute on 5 May 2002. The application to commence property proceedings out of time was filed by the husband on

14 December 2004, one year and seven months after the expiration of the 12 months from the decree absolute.
An application in respect of the child was filed by the wife in the Federal Magistrates Court on 19 November 2003. Orders were made ex-parte on 2 December 2003. The husband filed a response on

23 February 2004 and on 19 April 2004, orders were made by consent which provided for the child to reside with the wife and interim orders for contact. The application was fixed for final hearing on 24 February 2005. Following the filing of the application in relation to property, the final hearing of the child matter was refixed for 1 December 2005.
The requirement to obtain leave after the expiration of 12 months is contained in s.44 (3) of the Family Law Act1975 (Cth). Section 44(4) provides that the Court shall not grant leave unless it is satisfied that hardship would be caused to the applicant or a child of the marriage if leave were not granted.
The Court must first determine whether it 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; whether in the exercise of its discretion the Court should grant or refuse leave to institute proceedings: Whitford and Whitford (1979) FLC 90-612 at 78, 144, Hall and Hall (1979) FLC 90-679 78, 627.
Hardship means substantial detriment. The loss of the right to institute proceedings is not the hardship. It is the consequences of the loss of that right. The onus is on the applicant to show whether on his material he has a reasonable claim to be heard by the Court. However, if the applicant’s evidence can be shown to be false, such as by undisputed documentary evidence, then he may fail to establish a prima facie case notwithstanding, if his evidence were accepted, there would be a reasonable probability of success (Hall and Hall).
In exercising the discretion, the extent of and reason for delay is a factor as is prejudice to the respondent.
The husband and the wife each filed an affidavit. Neither party sought to cross-examine.
The husband set out the date of marriage, separation and the birth of the one child. He described the progress of the proceedings in relation to the child. He said that when the wife and he first met in 1985, both were attending the Footscray College of TAFE. He said that prior to the marriage, the wife and he were living in their respective parents’ homes and most of the joint expenses, such as paying for meals, fuel and going out expenses, as well as some of the wife's personal expenses like clothing, were paid by him.
The husband said that the wife and he purchased the former matrimonial home just prior to the marriage. It was purchased in joint names for approximately $103,000.00. The husband said that the wife and he paid a deposit of $10,000.00 from their respective savings which they pooled together at the time. He said they obtained a loan from the ANZ bank of approximately $93,000.00.
He said that he paid for all costs associated with the wedding and the honeymoon.
The husband said that at the time of the marriage, he was working at a BP Food Plus franchise in St Albans which he half owned with a friend through a company, Sentinel Way Pty Ltd. The husband said that they purchased the franchise in 1992 for approximately $100,000.00. He said that at the time of the marriage, it was financially stable and secure operating a $4 million a year turnover business with small liabilities and loans. The husband said that through a company, his friend and he had previously owned and operated a BP food Plus franchise in Brunswick. The husband said that his other assets at the time of the marriage were his half share in the matrimonial home, minimal savings, personal effects and his share of engagement and wedding gifts and some household effects that the wife and he had purchased immediately prior to the wedding.
The husband said that the wife's property at the time of the marriage was her half share in the matrimonial home, a 1983 Toyota Celica Motor Vehicle, savings, details of which he did not know, personal effects and her share of the engagement and wedding gifts and household effects purchased immediately prior to the wedding.
The husband said that significant income from the St Albans franchise was applied to the mortgage, including at times extra payments, household bills, improvement of the home, purchase of household effects and general living expenses. He said that as a result of this, considerable equity in the former matrimonial home was built up in a short period of time. He said the income from the St Albans franchise exceeded the wife's income.
The husband said that during the marriage, the original carpets in the home were pulled out and replaced with vinyl tiling. Renovations were performed which included new bathroom tiles, new shower, tiling to the entire house and a new kitchen. He said he painted the home.
The husband said that in 1995 the wife and he travelled overseas in June and July 1995, spending a considerable amount of money. The wife became pregnant during this time. She took leave without pay to travel and then extended that into unpaid maternity leave. He said that she did not work for approximately one year commencing June 1995.
The husband said that after returning to Australia, heavy workloads and long hours affected the health of his partner which affected the viability of the St Albans franchise. They had to transfer the franchise back to BP. His partner had become ill and died in 2000. The husband said that the net result was that neither his partner nor he received any value from the business after payment of debts and repayment of his partner's original capital. They were left with a joint debt of approximately $8,000.00.
The husband said that he worked briefly driving taxis and then from approximately January 1996 until June 1996, he was employed as a business manager for a Food Plus Convenience store in Brunswick.
The husband said that between approximately June 1996 and August 1996, the wife and he undertook the role of joint homemaker and parent. Both received Social Security benefits. He said he then worked as a taxi driver between approximately August 1996 and March 1997. In approximately August 1996, the wife returned to work at the bank.
The husband said that, by agreement with the wife, he commenced more study, but due to their financial position he was unable to continue. On 1 June 1997, he returned to work as a taxi driver on a full-time basis. He continued driving taxis until approximately February 1999. He said he mainly drove taxis at night and principally cared for the child during the wife's working hours. During the time the wife and he were unable to look after the child, she was cared for mainly by the wife's mother and occasionally his mother.
The husband said that from approximately 1993/1994, he developed health problems and was diagnosed with panic attacks and acute anxiety disorder coupled with constant headaches, tension and depression. He says he is optimistic about his future. He has remarried and his new wife and he were expecting a child due on 16 January 2005 (the affidavit was sworn in December 2004).
The husband said that in 1997 he transferred his share in the home to the wife. He said that the solicitor did not inquire of the wife the reason for the transfer. He said he was receiving letters of demand for payment of overdue bills relating to the St Albans franchise and the wife at the time believed the home needed protection from the debts. He said he was not fully aware of their legal rights and the implications. He said on reflection, the transfer was unnecessary as the debts were only approximately $8,000.00 and were not enforced against him. He said that at the time of the transfer, it was understood and agreed between them that notwithstanding the transfer, the home still belonged to both of them.
The ANZ mortgage was refinanced with National Australia Bank where the wife was working.
The husband said that in approximately March 1999 with the wife's agreement, he commenced a teaching course at the University of Melbourne, studying for a Graduate Diploma of Secondary Education. At the same time, he began private tutoring and taught at a college.
He said that in approximately June 1999, the wife opposed him continuing with the course and teaching. He terminated the course and recommenced work as a taxi driver. He worked as a taxi driver until approximately June 2000. Between then and January 2001 he worked as a representative for Orange from home. After that he drove taxis until the separation.
The husband said that there was a trial separation of approximately five weeks in 2000 and the parties finally separation on 1 February 2001.
The husband valued the matrimonial home at separation of approximately $170,000.00 and said it was currently valued at approximately $270,000.00. He said that at separation, the mortgage was $74,146.00. Other property at separation was a 1984 Toyota motor vehicle registered in his name which he sold for $3,000.00 in 2003 and the wife's Toyota Camry motor vehicle valued at approximately $5,000.00. He said there was household furniture and effects and tools which included a large dowry of expensive gold bangles and other jewellery given by parents and relatives and wedding gifts. He valued these items at $10,000.00.
He had a superannuation fund of minimal value at separation, and a current value of $1,338.00. He said there were bank savings of approximately $700.00, the wife's superannuation and her savings. He did not know the amount of the latter two.
The wife, in her affidavit, said that at the time of separation (February 2001), the former matrimonial home was valued at approximately $135,000.00 and the mortgage was $74,000.00. She said that there were no other assets of any significance. She was working full-time at the National Bank and her mother looked after the child.
The mother said that following separation, the husband has made no financial contribution to the support of the child apart from $5.00 per week child support.
Of the purchase of the former matrimonial home, the wife said that it was purchased in her name on 28th August 1993. This was some three months prior to the marriage. She signed a contract for a purchase price of $100,000.00 and a settlement date of 29 October 2003. She said she paid a deposit of $10,000.00 from her saving and produced a copy of her National Australia Bank statement showing a withdrawal on 14 September 1993 for $9,560.00. She said that was applied towards the deposit.
She said that subsequent to the signing of the contract, she advised her husband. He insisted he should be a party to a contract and so it was amended. She said she decided to purchase the home because the husband had planned to live with his parents for two years after the marriage and she did not want to do that.
The wife said the mortgage was obtained from the ANZ bank for $90,000.00. She paid from her savings $2,800.00 towards legal costs and stamp duty. She produced a copy of a National Bank Statement showing a withdrawal of $2,800.00 on 13 October 1993. She said that so far as the wedding and honeymoon expenses were concerned, the parties were married in her mother's home and the honeymoon consisted of driving interstate for a short period. She denied that the husband paid for the wedding expenses and said she paid for the wedding car, bombombieri, wedding photographs and portraits.
In relation to what the husband said about the purchase of the St Albans business, she said that occurred 2 years before the marriage. The husband's friend and business partner contributed some $70,000.00. Her parents lent the husband an interest free sum of $20,000.00. The husband borrowed $50,000.00 with her parents putting up their home as security for this loan. She said that she contributed $30,000.00 from savings with the National Bank. She produced a copy of a bank statement from the National Bank showing a withdrawal on 26 June 1991 of $30,000.00.
The wife said that she did not know if the BP franchise in Brunswick was sold in 1992. She said that at the time, the husband told her that the BP Brunswick franchise was exchanged for the BP St Albans franchise and no money changed hands. She said at a later time, the BP St Albans franchise was sold and $17,000.00 was repaid to her parents. The loans secured by her parents’ home was repaid in full. She said she was not aware of any further money that was remaining from the sale of the BP St Albans franchise. She said that no part of the $30,000.00 she had contributed was reimbursed.
She accepted that in the period of time the mortgage was with the ANZ Bank, the payments were made by the husband from the income generated from the BP St Albans franchise. She said that during this time, she was in full-time employment and her income was significant. She said her income was applied towards the payment of household bills and towards general living expenses.
The wife said that the loan was not reduced significantly and that considerable equity in the home was not built up as claimed by the husband. She said that when the loan was first taken out on 29 October 1993, it was for $89,912.65. On 1 April 1998, when the loan was refinanced with the National Australia Bank, the payout to the ANZ bank was $82,354.03. The wife produced copies of the ANZ home loan statement which verified these figures.
The wife said that at the time of refinancing the ANZ bank loan, she was employed by the National Bank and was able to obtain a discounted interest rate on part of the refinanced loan. There were two loans, one for $36,998.61 at the ordinary interest rate and $47,000.00 at a discounted interest rate, a total of $83,998.00. The wife produced copies of National Bank statements in respect of the two loans verifying these balances.
The wife said that from the time the loan was obtained with the National Bank, all of the repayments were made by way of direct debit from her salary. She said that at the time of separation, the balance of the mortgage was $74,146.24. She produced a copy of a bank statement showing the balance and payments of the mortgage in the period 11 January 2001 to 24 July 2001.
The wife obtained a market appraisal from a real estate agent in respect of the former matrimonial home at the time of separation. This appraisal was $135,000.00 to $140,000.00.
The wife said that on 25 July 2003, she received a retrenchment package from her employment with the National Australia Bank. She received a net payment of $43,282.82. She applied the funds to the reduction of the mortgage which reduced it to approximately $29,000.00.
The wife disputed some of the detail of the improvements made to the house referred to by the husband. She said that when they travelled overseas in 1995, she took paid leave at a time when she had accumulated 46 days of annual leave. She said that it was not expensive. She said the holiday was paid for by her from her savings and the husband's expenses were paid from income from the BP franchise.
The wife said that she returned to full-time work with the National Bank in March 1997 due to the family's financial difficulties. She said that the husband's work as a taxi driver from June 1997 was on a casual basis. She said that from the time the husband had stopped working in the BP St Albans franchise, his financial contribution to the home became minimal. She denied he made any significant non financial contribution to the home or the assets of the marriage. She said his care for the child was minimal who was mainly looked after by her mother and sometimes the husband's mother.
The wife said that her objection to the husband working at a college as a tutor was that he was doing it on a voluntary basis at a time when the family finances were poor. She alleged that his employment with Orange was terminated because he was accused of fraud involving in excess of $20,000.00. Other than producing a demand for payment from what appears to be at the collecting agency, the wife gave no details of this allegation.
The wife said that all the gold jewellery belonging to the husband, except for one bangle, was returned to him at separation. She disputed the husband's estimation ($10,000) of the value of the household furniture and effects at the time of separation. She said all the items referred to were seven years old and much of the furniture had no economic value.
The wife said that following separation the husband was assessed to pay $5.00 per week as child support, the minimum amount. She understood this was based on the husband being in receipt of Commonwealth benefits. She said she was aware that post separation the husband has been employed as a taxi driver.
The wife produced taxation documents showing her income for each of the years ending 30 June 1993 to 30 June 2003 (except for 30 June 1994 for which she said she had no records available). For 1993 was $28, 190.00, then reduced each year until 1997 when it was $12,335. In 1998, it was $30,635.00 and has steadily increased to the 2003-year, $36,200.00.
The wife said at the time of separation, there was a bank account in the name of the daughter which at 18 October 2000 had a balance of $1,085.95. The wife said that on 13 November 2000, the husband withdrew $1,050.00 and $35.00 on 15 December 2000.
The wife said that since separation she has carried out improvements as follows:
a)roller shutters in February 2002, total cost $6,578;
b)an evaporative cooling system in January 2004, $3008;
c)several amounts for landscaping totalling $3522.84;
d)Installation of a colourbond garage, February 2004, $4190;
e)guttering in March 2004, $1676

These amounts total $19,766.84. The wife said that in addition to the expenditure, she and her partner provided labour. Her partner had provided all of the bluestone pavers that he had initially intended to use at his home.
The husband said that the deposits and expenses for the purchase of the matrimonial home were paid from joint savings. The sale documents and bank records produced by the wife show that this is not correct. The $10,000.00 deposit and $2,800.00 towards legal costs and stamp duty were paid by the wife.
The wife’s evidence that she contributed $30,000.00 from savings to the purchase of the St Albans business to years before the marriage is not contested and is corroborated by her production of a bank statement. This assisted the husband in the purchase of the business which enabled him to earn income that was used in the course of the marriage. The $30,000.00 can be treated as a contribution by the wife for the purpose of assessing contributions under s.79(4) of the Family Act.
The husband had income from the St Albans franchise until, it would seem, mid to late June 1995. He then had a brief time driving taxis and then was employed as a business manager for a Food Plus Convenience store from January 1996 until approximately June 1996. He does not quantify the income he received at any time, but on his own evidence, he was not earning income between June 1996 and August 1996, March 1997 and June 1997 and March 1999 to June 1999. The balance of the time he drove taxis.
The wife has set out her income in detail. Except for about a year before and after the birth of the child, she worked earning an income which has a current day value of about $36,000.00. Since separation, the husband has made minimal financial contribution to the care of the child and none to the repayment of the mortgage on the house. The wife contributed her retrenchment payment to repayment of the mortgage.
On the question of hardship, the submission for the wife is that the husband has no claim under s.79(4). In assessing the husband's prospects of success in this case, some limited assessment of the three-step process for property applications must be made. First, the property must be ascertained and valued. The only asset of significant is the former matrimonial home. The husband says it was valued at $170,000.00 at the time of separation and now $270,000.00. He gives no basis for making this valuation. The wife has a market appraisal of $145,000.00 at the time of separation.
The second step is to assess the party's contributions. The wife made all the initial contribution plus an amount of $30,000.00 to the husband's business. Both parties made financial and non financial contribution, including caring to the child and homemaking, throughout the marriage. On the husband's evidence, contributions during the marriage were about equal. The wife disputes the husband's evidence, but for the purposes of this application, his evidence shows that he can put forward a case that contributions during the marriage were about equal.
Subsequent to separation, the husband's financial contribution to the payment of the mortgage, upkeep of the house and care of the child has been limited to the minimum amount of child support. The wife has made improvements to the family home. In terms of assessing contributions, these can be taken into account by valuing the property as if the improvements had not been made and in assessing contributions. They do not affect the question of whether the husband has a case to pursue.
The wife's initial contribution and her greater contribution since separation means that the assessment of contribution will be substantially in her favour. But it cannot be said that the husband has made no contribution, and certainly it cannot be said that he has no prospects of establishing some contribution.
The third step is to consider any adjustment for s.75(2) matters. The wife has the care of the child, who is nearly nine. She has another nine years of caring for a child under the age of 18. The husband has health problems which, in terms of s.75(2) matters has two consequences. It affects his income earning ability and his ability to pay child support. The consequence is that there is likely to be an adjustment in favour of the wife for s.75(2) matters. Again, it cannot be said that such an adjustment will necessarily extinguish the husband's entitlement. Nor can it be said that the husband's entitlement is likely to be so small that he will not suffer hardship if he cannot pursue the claim.
The major part of the property pool is the house. If the wife's valuation at the time of separation of $145,000.00 is taken, less the mortgage at that time of $74, 046.00, there is property of about $70,000.00.
If the husband had made an application at the time of separation, he would probably have succeeded to some extent. Since then, the house will have had a natural increase in value, independently of the improvements done by the wife. The husband can claim an entitlement to the share of this natural increase.
If the husband is not able to issue a property claim he will suffer substantial detriment and therefore hardship. The substantial detriment is the loss of his share of the matrimonial property.
Once it is accepted that the husband will suffer hardship, the Court must consider whether in its discretion it should permit the applicant to commence the proceedings out of time.
Extent and reason for delay must be considered. The husband said that on approximately 24 February 2002, he was personally served with the wife's application for divorce. He was residing with his parents. He decided not to attend the hearing of the divorce application on 4 April 2002.
He said that he sought no legal advice in relation to the divorce nor did he receive any document from the Court advising that the divorce had been granted. He said he obtained a photocopy of the decree nisi from the Court file on approximately 7 December 2004. The Court file includes a decree nisi of dissolution of marriage and memorandum of certificate that the decree nisi has become absolute. It has the address of the wife's solicitors and the name and address of the husband, the address being G. This is the address at which the husband was served with the application and where he says he continued to reside. Under the Court registry’s normal procedures, a copy would have been posted to the husband at this address. The document has writing on its reverse side which includes a warning about the 12 month time limit for property proceedings. Nevertheless, the husband says he did not receive it.
The husband says that he first knew of the legal proceedings in relation to the child when he received a letter from the wife's solicitors dated

5 December 2003 enclosing documents. He then retained solicitors. He said the retainer was in relation to both the child and property.
The husband said that during his first interview with his former solicitor, the solicitor advised him that he was required to file an application for property settlement within 12 months of the decree nisi becoming absolute. This solicitor advised him that he had not done that and any application after 12 months would require the leave of the Court. The husband says this is the first time he became aware of the 12 month requirement. He said his former solicitor advised him to address the problems in relation to the child first before dealing with the property settlement. He said the solicitor advised him that the two cases should be treated separately not concurrently. The husband said that when he discussed the issue of property settlement, his former solicitor told him words to the effect that we will worry about that later. This happened a number of times.
The husband travelled overseas with his new wife between 29 May 2004 and 24 August 2004. This was after the orders of 19 April 2004. The husband said he was represented by counsel at the hearing. He said that when he raised the issue of property settlement with his counsel appearing in 19 April 2004, he told him words to the effect that we definitely need to do something about it and that it needs to be looked at once he returned from overseas.
The husband said that in approximately early October 2004, he consulted his former solicitor and expressed his concern that nothing had been done regarding property and children issues. He said his former solicitor advised him to lodge a caveat to protect his interest. He said he personally lodged a caveat on 15 October 2004.
He received a letter dated 9 November 2004 from the Land Titles Office notifying that the caveat will lapse if he did not instigate legal proceedings prior to 17 December 2004. He was dissatisfied with his former solicitor and on 10 November 2004 he made preliminary inquiries with his current solicitor. He was contemplating his former solicitor continuing to act in relation to the proceedings for the child and retaining another solicitor to wait for the property case.
He said his current solicitor advised him that after making inquiries of the Law Institute of Victoria and the Registrar of the Family Court of Australia, he could not retain two solicitors acting in the one proceeding. He said that on or about the 12th of November 2000 in a telephone conversation, his former solicitor told him he was unable to represent him in the property case as it involved a conflict of interest given that he acted for the wife and I when the former matrimonial home was transferred into the wife's name alone in 1997. The husband said that this was the first time his former solicitor ever mentioned his inability to act on his behalf.
The husband said he retained his current solicitor on 6 December 2004. The application for extension of time was filed of 14 December 2004.
The husband does not give the precise date on which he first consulted his former solicitor. It would seem to have been in December 2003. He says that he raised the question of property proceedings at that time. The former solicitor has not filed an affidavit so it is not possible to know why he did not make an application in relation to property. But since the applicant had retained a solicitor, and says he raised the question of property proceedings with him, the delay after this first occurred cannot be held against the applicant. This means that the relevant delay for the purpose of exercising the discretion is May 2003 until December 2003, a period of 7 months.
Another matter relevant to the exercise of the discretion is prejudice to the wife. It is submitted on her behalf that she has been prejudiced because she has assumed, and was entitled to assume, that the house in which she is living is hers. She has carried out improvements and she might not have if she was aware that there would be property proceedings by the husband.
Improvements that the wife has made can be taken into account in property proceedings by valuation evidence. If the increase in value is less than the amount spent by the wife in the value of the work she has done it can be taken into account in assessing the contribution. Any supposed prejudice to the wife because she has carried out improvements can be removed in this way.
The other element of prejudice to the wife is that she has reorganised her life on the basis that she owns a house free of any claim by the husband. This has to be balanced against the prejudice to the husband if he cannot pursue his claim.
The relevant delay by the husband is seven months. He has not explained this delay. A significant factor is the hardship he will suffer if he cannot issue a property application. On balance, the discretionary matters favour the husband. He should be allowed to commence his property proceedings out of time.

I certify that the preceding seventy-eight (78) paragraphs are a true copy of the reasons for judgment of Phipps FM

Associate:

Date: