Gadzen & Simkin
[2018] FamCAFC 218
•16 November 2018
FAMILY COURT OF AUSTRALIA
| GADZEN & SIMKIN | [2018] FamCAFC 218 |
| FAMILY LAW – APPEAL – HARDSHIP – where the trial judge made orders allowing the de facto wife to bring property settlement and maintenance proceedings against the de facto husband seven years out of time pursuant to s 44(6) of the Family Law Act 1975 (Cth) – where the trial judge found that the de facto wife would suffer hardship within the meaning of s 44(6)(a) if leave were not granted – where the trial judge correctly identified the authorities relevant to the question of hardship but failed to undertake any analysis of the de facto wife’s potential claim and the likely costs of pursuing that claim – where the trial judge applied the wrong legal test to determining the question of hardship – where leave to appeal is granted and the appeal is allowed. FAMILY LAW – APPEAL – RE-EXERCISE OF DISCRETION – where counsel for the de facto wife provided an estimate of prospective legal costs likely to be incurred by the de facto wife in pursuing her claim – where no further evidence was sought to be adduced by the de facto wife – where it was therefore appropriate for the Full Court to re-exercise the discretion rather than remit the proceedings for rehearing – where the Court is not satisfied that the de facto wife established hardship within the meaning of s 44(6) – de facto wife’s Initiating Application was dismissed. |
| Family Law Act 1975 (Cth) ss 44(3), 44(5), 44(6), 90SF, 90SM, s 94AAA(6), 117 Federal Proceedings (Costs) Act 1981 (Cth) |
| Allesch v Maunz (2000) 203 CLR 172; [2000] HCA 40 Althaus and Althaus (1982) FLC 91-233; [1979] FamCA 47 Calder & Calder (2016) FLC 93-691; [2016] FamCAFC 36 Edmunds & Edmunds (2018) FLC 93-847; [2018] FamCAFC 121 Hall and Hall (1979) FLC 90-679; [1979] FamCA 50 Sharp v Sharp (2011) 50 Fam LR 567; [2011] FamCAFC 150 Whitford and Whitford (1979) FLC 90-612; [1979] FamCA 3 |
| APPELLANT: | Mr Gadzen |
| RESPONDENT: | Ms Simkin |
| FILE NUMBER: | BRC | 815 | of | 2018 |
| APPEAL NUMBER: | NOA | 40 | of | 2018 |
| DATE DELIVERED: | 16 November 2018 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Murphy, Aldridge & Kent JJ |
| HEARING DATE: | 27 September 2018 |
| LOWER COURT JURISDICTION: | Federal Circuit Court of Australia |
| LOWER COURT JUDGMENT DATE: | 3 May 2018 |
| LOWER COURT MNC: | [2018] FCCA 1092 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Looney QC |
| SOLICITOR FOR THE APPELLANT: | Parry Coates Family Law |
| COUNSEL FOR THE RESPONDENT: | Ms Cullen |
| SOLICITOR FOR THE RESPONDENT: | Gold Law Hervey Bay |
Orders
Leave to appeal the orders made in the Federal Circuit Court of Australia on 3 May 2018 be granted to the appellant.
The appeal be allowed and the orders made on 3 May 2018 be set aside.
The Initiating Application filed by the respondent in the Federal Circuit Court of Australia on 25 January 2018 be dismissed.
There be no order as to costs of the appeal pursuant to s 117 of the Family Law Act 1975 (Cth).
The Court grants to the appellant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal.
The Court grants to the respondent a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.
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 Gadzen & Simkin 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).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NOA 40 of 2018
File Number: BRC 815 of 2018
| Mr Gadzen |
Appellant
And
| Ms Simkin |
Respondent
REASONS FOR JUDGMENT
On 3 May 2018 Judge Cassidy concluded that Ms Simkin (whom for convenience is referred to as “the de facto wife”) would suffer “hardship” within the meaning of s 44(6)(a) of the Family Law Act 1975 (Cth) (“the Act”) if leave were not granted for her to bring property settlement and maintenance proceedings against Mr Gadzen (whom for convenience is referred to as “the de facto husband”). Her Honour made an order to give effect to that conclusion by granting leave and made other consequential orders.
The determinative issue on this application by the de facto husband for leave to appeal from those orders, and if leave is granted for the orders to be set aside, is whether the trial judge made errors of principle in determining the question of “hardship” within the meaning of the section. The de facto husband contends that the trial judge failed to apply the correct legal test to determine that question. Whilst the de facto husband’s Further Amended Notice of Appeal filed on 24 August 2018 foreshadowed challenges directed to discretionary considerations in the application of s 44(6), at the outset of the hearing the de facto husband’s counsel confirmed that his application for leave to appeal, and the appeal if leave is granted, rests solely upon the contentions of error with respect to the trial judge’s finding concerning hardship. That is, the de facto husband does not pursue any challenges directed to any discretionary matters falling for consideration under s 44(6) of the Act if hardship is established.
These reasons seek to explain our conclusion that there is merit in the de facto husband’s contention that the trial judge erred in principle in failing to apply the correct test to determine the question of hardship within the meaning of the section. As will be explained, it is fundamental to such a determination that consideration is given to whether an applicant for leave demonstrates a prima facie or arguable case of substance having regard to all the circumstances of the case, taking into account the likely cost to be incurred by the applicant in pursuing the claim. Here, as will be discussed, the trial judge did not undertake that consideration. The trial judge focussed upon the applicant’s evidence as to her current financial circumstances, and relied upon that evidence, without undertaking the fundamental consideration to which we have referred, in making a finding of hardship.
It follows that leave to appeal should be granted and the appeal allowed. For the reasons which follow we are satisfied that it is unnecessary to remit the proceedings for rehearing. Rather it is appropriate that we re-exercise the discretion.
Relevant factual context
The trial judge found (at [1]) that the parties commenced cohabitation in approximately 2001. The de facto husband (born in 1950) was then aged about 51 years and the de facto wife (born in 1956) was then aged about 45 years.
There are no children of the relationship which came to an end in 2009. As the trial judge noted at the outset of the reasons for judgment the de facto wife’s application for leave “is seven years out of time”.
Subsequent to their final separation in April 2009 both parties have become married to others. The de facto wife commenced cohabitation with her current husband in 2013 and they intermarried in 2016. The de facto wife has been living with her current husband in the home he owns in City M since about
mid-2013.
On the de facto wife’s case, at the commencement of the relationship she had net assets, including superannuation of $68,000, worth a total of $83,000.[1] The de facto wife acknowledges that at the commencement of their relationship the de facto husband had substantial assets including his home at Suburb C worth, the de facto wife says, $1,585,000.[2] The de facto husband’s estimate that at the commencement of cohabitation his total net assets were worth $4.75 million was not disputed by the de facto wife.[3]
[1] Affidavit of de facto wife filed 25 January 2018 at paragraph 29.
[2] Affidavit of de facto wife filed 25 January 2018 at paragraph 30.
[3] Affidavit of de facto husband filed 28 February 2018 at paragraph 27.
The de facto husband’s affidavit evidence for the hearing, which was undisputed by the de facto wife, included that:
a)During the relationship the parties lived in properties owned or rented by the de facto husband, including from 2001 to 30 June 2005 in his Suburb C home. The de facto wife made no direct or indirect financial contribution to the acquisition, conservation or improvement of the Suburb C home;[4]
b)In February 2005 the de facto husband purchased land at Suburb D for $675,000 and constructed a five-bedroom, three-bathroom, three-space garage on the land and the parties lived in that home from approximately mid-2007 until their separation in April 2009. The de facto wife did not make any financial contribution, direct or indirect, to the acquisition, conservation or improvement of the Suburb D home. That home was sold in August 2017 for $1,705,000;[5]
c)Prior to, and during the relationship, the de facto husband owned substantial commercial properties and held numerous corporate and trust interests, to none of which the de facto wife made any direct or indirect financial contribution;[6]
d)The de facto husband arranged for the de facto wife to be added to his self-managed superannuation fund on 14 May 2007 and at about that time the de facto wife rolled her superannuation entitlements with Sunsuper into the de facto husband’s self-managed fund; [7]
e)In the 2007 financial year the de facto husband also contributed $100,621 to the de facto wife’s member benefits. Subsequent to separation in April 2009, as at 1 July 2009, the de facto wife’s superannuation benefits in that fund stood at $162,970.30;[8] and
f)The de facto wife ceased her membership in the superannuation fund on 27 March 2015 and on that date the amount of $213,118 was paid to or rolled out to the de facto wife.[9]
[4] Affidavit of de facto husband filed 28 February 2018 at paragraphs 34 to 36.
[5] Affidavit of de facto husband filed 28 February 2018 at paragraphs 37 to 40.
[6] Affidavit of de facto husband filed 28 February 2018 at paragraphs 42 to 59.
[7] Affidavit of de facto husband filed 28 February 2018 at paragraphs 72 to 73.
[8] Affidavit of de facto husband filed 28 February 2018 at paragraphs 73 to 74.
[9] Affidavit of de facto husband filed 28 February 2018 at paragraph 77.
During the relationship, from about 2002, the de facto wife was in paid employment in one of the de facto husband’s companies, Company L. The de facto wife continued in this employment throughout the relationship and indeed post-separation until July 2013.[10]
[10] Affidavit of de facto husband filed 28 February 2018 at paragraph 76.
Taken from the de facto wife’s affidavit she drew a wage of approximately $54,000 per annum in that employment and she says that in approximately 2008 there was a downturn in the industry and that only through her efforts did the business survive and generate an income.[11]
[11] Affidavit of de facto wife filed 25 January 2018 at paragraph 33.
The de facto husband relied upon an affidavit of his accountant. Attached to his accountant’s affidavit is a financial report which shows that with respect to Company L as at 30 June 2013 the company had a net asset deficiency of $160,398 and those losses were funded by the de facto husband and by bank loans guaranteed by the de facto husband.
It is also to be noted that with respect to this company, the de facto husband’s undisputed evidence is that in 2008 he established a family trust for the de facto wife and transferred 50 per cent of his shareholding in Company L to that trust for no consideration and that the de facto wife’s shareholding was transferred back to the de facto husband’s trust in 2014/2015 for $25,000.[12]
[12] Affidavit of de facto husband filed 28 February 2018 at paragraphs 45 and 47.
The de facto wife’s affidavit evidence includes that (for an unspecified period) she “looked after the tenant paperwork” for one of the de facto husband’s commercial properties in the Northern Territory together with another
office-retail building and that she was responsible for homemaking tasks for the two parties during the relationship.[13]
[13] Affidavit of de facto wife filed 25 January 2018 at paragraphs 34 and 35.
In relation to the Suburb D property the de facto wife’s evidence is to the effect that, together with the de facto husband, she had input into the design process of the home constructed on the property.[14]
[14] Affidavit of de facto wife filed 25 January 2018 at paragraph 36.
Commencing from shortly after separation, on 1 June 2009, the parties seemingly entered into a series of informal agreements.[15] With respect to the agreement on 1 June 2009 the de facto husband agreed to:
a)Purchase a residential premises for the de facto wife limited to a maximum sum of $450,000 upon the sale of a property owned by the de facto husband or as soon as his financial circumstances allowed;
b)Pay the de facto wife’s rent in the sum of $400 per week pending the purchase of a property on her behalf;
c)Purchase furniture and electrical equipment for the de facto wife in the sum of $15,000;
d)Provide a legacy to the de facto wife in the sum of $1 million in his will with the terms of such will to remain unchanged for at least two years; and
e)Bequeath to the de facto wife one third of the balance of his superannuation account, The Gadzen Superannuation Fund, following the transfer of a commercial property to the fund’s trustees per a binding death benefit nomination.
[15] None of the agreements were ever formalised as a Part VIIIAB financial agreement under the Act.
This agreement was described as being consistent with a document titled “Marital Agreement” prepared by Solicitor Y outlining the payments the de facto husband would pay to the de facto wife in the event of separation signed by the parties on or around 28 June 2001. A copy of this agreement is not provided in the appeal record.
The de facto husband had already made arrangements for the de facto wife to receive a legacy of $1 million under his will on 4 December 2008 (ie four months before separation) and made a binding death benefit nomination in favour of the de facto wife. He indicated to the de facto wife that he would not alter the terms of his will for “at least 24 months”.
It is uncontentious that the de facto husband paid the de facto wife’s rent from separation in April 2009 until October 2010. On 19 October 2010, the de facto husband paid a deposit of $100,000 towards the purchase of a property situated at Q Street, Suburb B (“the Suburb B property”) in the de facto wife’s sole name for approximately $430,000. The balance of the purchase price was funded by a loan from the Bank of Queensland (“BOQ”) secured by way of mortgage over the Suburb B property in the de facto wife’s sole name. Following this purchase, the de facto husband made interest-only mortgage repayments on behalf of the de facto wife in the sum of $2,000 per month.
On 8 July 2013, the de facto husband sent a letter to the de facto wife setting out the contributions made by the de facto husband pursuant to their agreement. In this letter the de facto husband stated that “I confirm that I will have no other financial maintenance obligation”. This letter included the Suburb B property at its full purchase price (plus insurance) and the letter was countersigned by the de facto wife.
A further undated letter was sent by the de facto husband in similar terms to the July 2013 letter however this letter noted that pursuant to the “amended terms” of their agreement, the monies paid towards the Suburb B property and furniture, as well as the sum of $100,000 which had been contributed to the de facto wife’s superannuation entitlement would be deducted from the sum the de facto wife was to otherwise receive by way of legacy under the de facto husband’s will. It also noted that the de facto wife was to receive shares in Company L for no consideration upon the death of the de facto husband. The de facto wife asserts in her affidavit filed 25 January 2018 that this letter was received around January 2011. This letter was also countersigned by the de facto wife.
In mid-2013, the de facto wife moved out of the Suburb B property and moved in with her current husband in a home he owns at City M. It was around this time that the de facto wife ceased employment for Company L. The Suburb B property was tenanted following the de facto wife’s vacation of the property with the de facto wife receiving that income. At the time of swearing her Financial Statement in January 2018, the de facto wife was receiving approximately $355 per week in rental income from the Suburb B property.
The de facto husband continued to make interest-only repayments of $2,000 per month on behalf of the de facto wife for the mortgage secured by the Suburb B property until August 2017. In August 2017, the de facto husband reduced his payments to $1,000 per month and, on 31 December 2017, ceased all repayments entirely after giving notice to the de facto wife on 1 August 2017 of his intention to cease making the repayments on her behalf. By December 2017, the mortgage had fallen into arrears by $5,819.25.
The undisputed affidavit evidence of the de facto husband included the following at paragraph 78:
Using the abovementioned amounts, I calculate that I have made
post-separation payments/contributions to the Applicant or for her benefit of $445,121:
a.
Rent
$31,199
b.
Furniture
$20,000
c.
Deposit on [Suburb B property]
$100,000
d.
Share transfer
$25,000
e.
Mortgage instalments
$168,301
f.
Superannuation contribution
$100,621
Total
$445,121
(As per original)
The de facto wife engaged her solicitors to negotiate with the solicitors acting for the de facto husband but was unable to reach an agreement. The de facto wife filed an application in the Federal Circuit Court of Australia on 25 January 2018 (almost seven years out of time) seeking leave to bring s 90SM and “s 90SF” (intended to be s 90SE) applications pursuant to s 44(6) of the Act.
Subsequent to the orders made on 3 May 2018 which are the subject of this appeal, the parties agreed to consent orders made by Judge Cassidy on 14 May 2018. By those orders, without any admission of responsibility or liability, the de facto husband agreed to pay the mortgage arrears on the Suburb B property and to make monthly payments on that property. On the hearing of the appeal the parties agreed that approximately $22,000 had been paid by the de facto husband under those orders. Whilst it had been foreshadowed by the de facto husband in advance of the hearing of the appeal that he may seek to file an Application in an Appeal and a supporting affidavit (copies were provided to the Court in advance of the hearing) seeking that this Court order that the de facto wife repay the de facto husband, that was not pursued. Rather, the de facto husband referred to this further expenditure as being a relevant fact for this Court to consider on any re-exercise of discretion by this Court.
Applicable principles for determining the question of hardship
Section 44(5) of the Act prescribes that a party to a de facto relationship may apply for, inter alia, orders for property settlement or maintenance only if the application is made within the period of two years after the end of the de facto relationship – defined as “the standard application period”.
Section 44 of the Act relevantly provides:
44 Institution of proceedings
…
(5)Subject to subsection (6), a party to a de facto relationship may apply for:
(a) an order under section … 90SM…
…
only if the application is made within the period of 2 years after the end of the de facto relationship (the standard application period).
(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 … if leave were not granted…
(As per original)
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 and Whitford[16] 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.
[16] (1979) FLC 90-612, 78,144 (“Whitford”).
Self-evidently, the Full Court there and subsequent Full Courts (as will be discussed) have emphasised that hardship within the meaning of the section must first be established for the discretion to grant leave to arise.
In discussing hardship the Full Court in Whitford said:[17]
The hardship referred to in sec. 44(4) is the hardship which would be caused to the applicant or a child of the marriage if leave were not granted. The loss of the right to institute proceedings is not the hardship, to which the subsection refers. It is with the consequences of the loss of that right, with which the subsection is concerned. The requirement, that the Court must be satisfied that hardship would be caused if leave were not granted, implies that it must be made to appear to the Court that the applicant would probably succeed, if the substantive application were heard on the merits. If there is no real probability of success, then the Court cannot be satisfied that hardship would be caused if leave were not granted. Further, the matter with which the Court is concerned is not whether the applicant or a child is suffering hardship, but the question is whether the applicant or a child would suffer hardship if leave were not granted. If the probable result of the hearing on the merits is that the hardship is not likely to be alleviated, then the Court cannot be satisfied that the applicant or a child would suffer hardship if leave were not granted.
[17] At 78,144.
The Full Court then proceeded to discuss the meaning of “hardship”. In the course of that discussion the Full Court said:[18]
In our view the meaning of “hardship” in subsec. 44(4) is akin to such concepts as hardness, severity, privation, that which is hard to bear or a substantial detriment. Cf. the meanings assigned to “hardship” in the Shorter Oxford Dictionary and in Webster’s New International Dictionary…
…
In ordinary parlance, hardship means something more burdensome than “any appreciable detriment”. We consider that in subsec. 44(4) the word should have its usual, though not necessarily its most stringent, connotations. It is impossible to lay down in advance what particular facts may or may not amount to hardship in the relevant sense. As a general proposition it might be said that, the inability of an applicant to pursue a claim which in the circumstances of the applicant or a child of the marriage is trifling, generally will not cause hardship. Similarly, where the costs which the applicant will have to bear himself or herself are about as much or more than what the applicant is likely to be awarded on a property claim, ordinarily hardship would not result if leave to institute proceedings were not granted. But otherwise we find no warrant in either subsec. 44(3) or 44(4) for saying that that the right or entitlement lost must be a substantial one.
(As per original)
[18] At 78,144 – 78,145.
In Althaus and Althaus[19] Evatt CJ (with whom Marshall SJ and Strauss J agreed) observed of earlier cases:
…Now to some extent there may be an exercise of semantics involved here. The case of McDonald referred to a reasonable prima facie case as the test. Other cases such as McKenzie and Whitford suggest that the applicant needs to show that she would probably succeed. In the case of Perkins and Perkins (1979) FLC 90-600, Lindenmayer J. suggested that the test was that there was a reasonable probability of the claim being successful…
In my opinion, sec. 44(3) and (4) are not intended to require a detailed hearing on the merits to determine whether the applicant’s claim will succeed. The exercise is to determine whether there is a reasonable claim to be heard. That is the essence of the inquiry into whether hardship will be suffered by denying the applicant the right to litigate that claim.
[19] (1982) FLC 91-233, 77,266 – 77,267.
In Hall and Hall[20] the Full Court said:
Fundamental to that [a finding of hardship] is a determination of the quality or character of the potential claim. In relation to that different cases have used somewhat different phrases to describe it so that it has become something of a matter of semantics to describe in different ways what is really the same basic concept…
[20] (1979) FLC 90-679, 78,627; see also McCoy and Chancellor [2014] FamCAFC 62; Sharp v Sharp (2011) 50 Fam LR 567 (“Sharp”) and Edmunds & Edmunds (2018) FLC 93-847 (“Edmunds”).
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.
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.
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.
Approach of the trial judge
An issue in the hearing was the admissibility of the evidence of the de facto wife as to the various post-separation informal agreements earlier discussed, to which objection was taken by the de facto husband. The trial judge advised the parties during the hearing that her determination of that objection would appear in her reasons for judgment. This explains why the trial judge discussed that topic at relative length at the outset of her reasons for judgment (at [3] to [10]).
On the central issue of hardship, the trial judge made reference to Whitford at [21] and [22] and then accepted the submission of the de facto husband at [23] as follows:
I accept the submission of the defacto husband at paragraph [19] of the Respondent’s written submissions filed 5 March 2018:
“19. What constitutes hardship has also been considered by the Full Court in Hall & Hall (1979) FLC 90-679 at 78,627 where the Court said:
‘Fundamental to that is the determination of the quality or character of the potential claim.’
(As per original)
However, having expressed her acceptance that it is fundamental to determining the question of hardship to consider “the quality or character of the potential claim” nowhere in the reasons can it be seen that the trial judge undertook that consideration. After those references to authority in the reasons the trial judge immediately moved to discuss the discretionary considerations of delay and prejudice to the de facto husband.
In then addressing the topic “[h]ardship” under that heading commencing at [30] of the reasons her Honour simply quoted paragraphs 23 to 25 of the de facto wife’s affidavit in full which are directed only to the de facto wife’s current income and expenses and the fact that the de facto husband ceased paying the mortgage payments on her Suburb B property. Immediately after referring only to those paragraphs of the de facto wife’s affidavit the trial judge concluded:
31. I consider this evidence is sufficient to demonstrate hardship…
(Emphasis added)
It would appear to be unavoidable to conclude that by “this evidence” the trial judge was referring solely to the current financial circumstances of the de facto wife as deposed to in the three paragraphs of her affidavit the trial judge quoted in full. However, that could not “demonstrate hardship”. An analysis of the potential claim of the de facto wife was necessary to determine whether or not hardship would be occasioned to the de facto wife if she were not granted leave to pursue that claim. Further, as the authorities to which reference has been made demonstrate, an essential element is to consider the prospective legal costs of pursuing the identified or identifiable claim. Obviously, the prospective costs may render the conclusion that no hardship would be occasioned to an applicant to pursue an uncommercial claim. The trial judge gave no consideration to this essential element and was therefore in error.
We accept the submissions of the de facto husband that having recited the evidence of the de facto wife as to her current financial circumstances the trial judge wrongly found that such evidence was “sufficient to demonstrate hardship” without addressing or otherwise referring to the nature or quality of the de facto wife’s potential claim. All the trial judge expressed as one of her conclusions (at [32(c)]) is:
The applicant has prima facie a claim under the Family Law Act.
That conclusion is unsupported by any analysis of the de facto wife’s claim.
The trial judge thus applied the wrong legal test to determining the question of hardship and failed to consider and determine whether or not the de facto wife had a prima facie or arguable claim that was substantial having regard to all the circumstances of the case, including her potential costs in pursuing that claim.
It is for these reasons that we consider leave to appeal ought be granted, the appeal allowed and the orders made on 3 May 2018 set aside.
Re-exercise of discretion or remitter of proceedings?
In the event the appeal was to be allowed and the orders made on 3 May 2018 set aside, the de facto husband sought that this Court re-exercise the discretion in relation to the de facto wife’s application and dismiss it. That is, the de facto husband contended that the proceedings ought not be remitted to the Federal Circuit Court for rehearing.
Counsel for the de facto wife submitted that the proceedings ought be remitted to the Federal Circuit Court for rehearing so that the de facto wife might adduce further evidence.
The power to re-exercise the discretion of the trial judge, or to order a rehearing, is contained in s 94AAA(6) of the Act with respect to appeals from the Federal Circuit Court. The principles governing the exercise of that power are set out in Allesch v Maunz.[21] If this Court is to re-exercise the discretion it must do so by reference to the current circumstances and the parties must be given an opportunity to adduce evidence as to circumstances as they presently exist.
[21] (2000) 203 CLR 172.
In opposing the de facto wife’s contention concerning the adducing of further evidence, counsel for the de facto husband agitated that the de facto wife had had sufficient opportunity to put such further evidence before this Court. Counsel relied upon the decision of the Full Court in Calder & Calder[22] as follows:
[22] (2016) FLC 93-691.
61.As will be clear from the discussion above, integral to an appeal from a discretionary judgment is the question of whether the appellate court itself should re-exercise the discretion or remit the matter for re-hearing. Equally integral to the conduct and presentation of the appeal is the obligation of each party to properly address that question.
62.If the Full Court is minded to re-exercise the discretion, a party opposed to that course should be in a position to advance a basis for that opposition. They should be able to demonstrate that the discretion cannot be legitimately re-exercised by the Full Court, and that the appropriate order is to set aside the order and remit the matter for re-hearing or, in terms of s 94(2), “order a re-hearing, on such terms and conditions, if any, as it considers appropriate”.
63.In order to advance such an argument, the party opposing the
re-exercise must satisfy the appellate court of the actual or likely existence of evidence which demonstrates such a change in circumstances since the trial as to be relevant to the exercise of the discretion (and that a re-hearing is necessary because the evidence of such a change is disputed).
64.While each case will depend upon its facts, the Full Court will ordinarily not be persuaded of the need for a re-hearing by assertions that investigation may result in evidence of a material change being revealed; nor will it ordinarily be persuaded if an inadequate explanation is provided for the failure to adduce that evidence before the Full Court. To be persuaded, the Full Court will require more than a broad assertion about the existence of evidence which, even if it exists, is not demonstrative of a material change.
We sought to ascertain from counsel for the de facto wife the nature of the further evidence the de facto wife would seek to adduce. Counsel confirmed that evidence as to the de facto wife’s estimated prospective costs of pursuing the substantive claim for property settlement would be adduced. Whilst counsel also agitated the proposition that further evidence may include that the Suburb B property might be subject to a forced sale by the mortgagee bank in the future, and that the de facto wife’s current equity of $120,000 in that property (according to her Financial Statement) might evaporate, this was obviously entirely speculative. More fundamentally for present purposes, as confirmed by the de facto wife’s counsel, already contained in the appeal record (including the de facto wife’s Financial Statement) was all the material relevant to that issue.
In the course of exchanges between the bench and counsel for the de facto wife, this Court received an estimate of prospective legal costs of the de facto wife of $150,000. The de facto husband had no objection to this Court receiving and acting on this estimate (the de facto husband’s estimated costs were in the range of $167,000 to $190,000).
The exchanges between the bench and counsel for the de facto wife culminated in the following on the topic of remitting the proceeding for the adducing of further evidence:
MURPHY J: I’m needing to…what I’m directing my attention to is a figure that we might be able to rely upon for the purposes of the re-exercise. So, what do you say the figure would be approximately?
[COUNSEL FOR THE DE FACTO WIFE]: To final hearing estimated $100,000 to $150,000.
MURPHY J: So let’s take the higher figure - $150,000. So if we assume that we have evidence now before the Court from the bar table, subject to anything [counsel for the de facto husband] wants to say about it, that the legal fees anticipated by your client are around about $150,000. Okay? And all of the evidence you’ve referred us to in respect of in the last few moments in respect of, prima facie, all of it is on the record.
[COUNSEL FOR THE DE FACTO WIFE]: Yes your Honour.
MURPHY J: What was do you say…
[COUNSEL FOR THE DE FACTO WIFE]: I have nothing further to say your Honour.
MURPHY J: Well just a moment, just before you sit down. So am I right in concluding that if we assume for the purposes of this exercise that your client’s legal fees would be in the region of $150,000 to take the matter to trial, that we need no other material other than what is on the record in order to re-exercise the discretion for ourselves?
[COUNSEL FOR THE DE FACTO WIFE]: That’s correct your Honour.
MURPHY J: Is that, as I, and I’m trying to be very careful by not being unfair to you, but that’s as I read your outline.
[COUNSEL FOR THE DE FACTO WIFE]: That’s correct your Honour.
MURPHY J: So we have all of the material that we need if we add the figure for legal fees so there’s no reason for this case to be remitted.
[COUNSEL FOR THE DE FACTO WIFE]: That’s correct your Honour.
ALDRIDGE J: So if it was remitted you’d want to put on no further evidence?
[COUNSEL FOR THE DE FACTO WIFE]: It would have been in respect of legal fees but if you accept what I have to say then I don’t have anything further to add your Honour.
(Appeal hearing, 27 September 2018, transcribed from the Court recording)
It was thus clear in the end that there would be no utility in remitting the proceedings as the only further evidence would be estimated costs and that figure was agreed upon for our purposes, and indeed counsel for the de facto wife ultimately acknowledged that.
Relevant to this Court’s consideration as to whether the discretion ought be
re-exercised is the nature of applications for leave to extend time under s 44 of the Act. As the Full Court recently observed in Edmunds at [16]:
The hearing of applications for leave pursuant to s 44(3) should be “summary in character” (Neocleous &Neocleous (1993) FLC 92-377 at 79,914) and not a final hearing of the matter (Whitford and Whitford (1979) FLC 90-612 at 78,143; Hedley & Hedley (2009) FLC 93-413 at [32] per Finn J and at [111] per Boland J). A detailed hearing of the case on its merits is not required (Althaus and Althaus (1982) FLC 91-233 at 77,267).
The transcript of the hearing of the application before the trial judge on 6 March 2018 records that the proceeding was conducted by telephone. There was no cross-examination of any witness. Each party had filed written submissions in advance of that hearing and each of the solicitor for the de facto husband and counsel for the de facto wife made relatively brief oral submissions supplementing the written submissions and the trial judge reserved judgment.
We are satisfied that in the circumstances of this case this Court should
re-exercise the discretion rather than remitting the proceedings for rehearing in the Federal Circuit Court.
Re-exercise of discretion
It bears emphasis that, as the Full Court observed in Edmunds at [18], “an applicant for leave is not required to establish their final case on the leave application. Similarly, the Court is not to approach the application on that basis”. However, to establish “hardship” within the meaning of s 44 an applicant for leave must demonstrate a prima facie or arguable case of substance, having regard to all the circumstances of the case, taking into account likely costs. A striking feature of this case is that the de facto wife has received very significant benefits post-separation, including the product of the de facto husband’s significant contribution to her superannuation during the relationship.
We give full weight to the de facto wife’s homemaking contribution (from which she benefited equally with the de facto husband in the household with no children); her role in Company L; her involvement to some extent in the de facto husband’s tenancies in commercial premises in the Northern Territory; and her assistance to the de facto husband in planning and designing the Suburb D home (in which the parties lived for about 18 months up until their separation).
Yet, this was an approximate eight year relationship which produced no children. None of the informal agreements earlier referred to have binding force. Adding the sum of $22,000, to which we have already referred, to the sum of $445,121 identified in the de facto husband’s trial affidavit, the de facto wife has received $467,121 in post-separation benefits (including the superannuation contribution of $100,621 made in 2007).[23] She holds net property interests worth $134,600.[24] She estimates that she will expend approximately $150,000 pursuing her claim. We are unable to see how the de facto wife’s potential claim in property settlement proceedings could conceivably approach, let alone exceed, that which she holds together with that which she has received.
[23] Affidavit of de facto husband filed 28 February 2018 at paragraph 78 and affidavit of de facto husband’s solicitor filed by leave on 27 September 2018 at paragraph 14.
[24] Financial Statement of de facto wife filed 25 January 2018.
In arriving at that conclusion we repeat the unchallenged evidence to which we have earlier referred, which includes the following:
·The direct financial contributions made by the parties at the commencement of the relationship, expressed in percentage terms, is 98.3 per cent by the de facto husband and 1.7 per cent by the de facto wife. There can be little doubt that the respective direct contributions is an overwhelmingly important factor in the circumstances of this case and all the more so because of the amounts received during and after the relationship by the de facto wife;
·The parties separated nine years ago. They have been separated longer than they cohabited. In that time the de facto husband’s assets (including superannuation) have diminished by approximately $1.75 million;
·The de facto wife cannot be seen to have made any contribution of any kind to the de facto husband’s assets. For his part, the de facto husband’s continuing contributions are not only to the conservation of his own assets but contributions to the de facto wife and her principal asset which have already been discussed;
·The de facto wife entered the relationship with assets (predominantly unvested superannuation) of approximately $83,000. She currently has total property interests worth $470,600 and liabilities of $336,000 – net $134,600. She received from the de facto husband contributions to her superannuation of approximately $100,621 during the relationship. She now discloses no superannuation. There is no accounting for the contributions received by her; and
·The de facto husband has paid to or for the benefit of the de facto wife a total of $467,121 since separation (including the superannuation contribution made during the relationship).
Counsel for the de facto wife’s contention that some or all of the payments made to the de facto wife might be characterised as maintenance must be rejected. The de facto wife could not, on the evidence, establish the required need. From separation in 2009 until mid-2013 the de facto wife was earning employment income in the de facto husband’s company at $54,000 per annum. At about the time she ceased employment she commenced living in a home owned by her current husband. The de facto wife received from the de facto husband’s
self-managed superannuation fund $213,118 in 2015, the use of which goes unexplained. From mid-2013 the de facto wife rented out the Suburb B property and retained the rental proceeds without having to pay the mortgage, which was being paid by the de facto husband.
To the extent that the de facto wife’s prospective claim might be seen to rest more upon s 90SF(3) factors than a contributions based entitlement, a potentially significant matter is the difference in wealth between the parties. Yet, a greater disparity existed at the start of the relationship and, to repeat, the parties’ current financial circumstances arise in a post-separation period greater than the length of the relationship. Otherwise, reference to the relevant s 90SF(3) factors does not admit of any conclusion supportive of the asserted hardship.
For these reasons we are not satisfied that the de facto wife establishes hardship within the meaning of s 44(6) of the Act. It follows that her Initiating Application filed in the Federal Circuit Court on 25 January 2018 must be dismissed.
Costs
In the event this appeal were to succeed the de facto husband seeks an order that the de facto wife pay his costs.
Whilst it can be seen that the de facto wife has been wholly unsuccessful on the appeal, within the meaning of s 117(2A)(e), we consider that the vast disparity in the respective financial circumstances of the parties (s 117(2A)(a)) results in the conclusion that there ought be no order for costs of the appeal proceedings pursuant to s 117 of the Act.
However, as the appeal has succeeded by reason of errors of law made by the trial judge, both parties are entitled to receive certificates pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) and we will so order.
I certify that the preceding sixty-six (66) paragraphs are a true copy of the reasons for judgment of the Full Court (Murphy, Aldridge & Kent JJ) delivered on 16 November 2018.
Associate:
Date: 16 November 2018
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