Haigh & Reilly
[2022] FedCFamC2F 1164
Federal Circuit and Family Court of Australia
(DIVISION 2)
Haigh & Reilly [2022] FedCFamC2F 1164
File number(s): CAC 1995 of 2021 Judgment of: JUDGE MANSFIELD Date of judgment: 1 September 2022 Catchwords: FAMILY-LAW - PROPERTY- Family Law Act 1975 Section 44 – Application for leave to proceed up to seven years out of time granted – Jurisdiction in de facto financial causes - respondent has put the applicant in the position of a defendant by instituting a de facto financial cause in a state court – de facto financial provisions under the Family Law Act 1975 relationship with NSW State laws – State court claim is not severable from the applicant’s claim and it arises out of a common sub-stratum of facts Legislation: Family Law Act 1975 (Cth) – ss4, 39A, 44(5), 44(6), 90RC, 90SF, 90SM Cases cited: Arcand & Boen [2021] FamCAFC 155
Emerald & Emerald [2018] FamCAFC 217
Hall v Hall (1979) FLC 90-679
Skelton & Lindop [2022] FedCFamC1A 47
Whitford & Whitford (1979) FLC 90-612Division: Division 2 Family Law Number of paragraphs: 44 Date of hearing: 7 July 2022 Place: Canberra Counsel for the Applicant: Mr Howard Solicitor for the Applicant: Keating Avery Solicitors Counsel for the Respondent: Mr Mathews Solicitor for the Respondent: Broun Abrahams Burreket ORDERS
CAC 1995 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR HAIGH
Applicant
AND: MS REILLY
Respondent
order made by:
JUDGE MANSFIELD
DATE OF ORDER:
1 sEPTEMBER 2022
THE COURT ORDERS THAT:
1.The applicant is granted leave pursuant to s 44(6) of the Family Law Act 1975 (Cth) to prosecute her claim for property settlement relief under Pt VIIIAB of the Act, filed on 14 September 2021.
2.The matter be listed before Judicial Registrar Hiles for further case management at 12:00pm on 8 November 2022.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Haigh & Reilly has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE MANSFIELD:
INTRODUCTION
In 2006, the applicant de facto wife (‘the applicant’) and the respondent de facto wife (‘the respondent’) commenced their relationship and began living together. The applicant says they separated in 2015. The respondent says they separated in 2013. The standard application period within which a party may apply for a property order under Part VIIIAB of the Family Law Act 1975 (Cth) (‘the Act’) expired in either 2015 or 2017.
On 14 September 2021, the applicant commenced proceedings seeking an order for the alteration of property interests pursuant to section 90SM of the Act. The application is out of time and without the consent of the respondent. The application by the applicant is for leave pursuant to section 44(6) of the Act to prosecute her claim for property settlement relief under Part VIIIAB of the Act.
For the following reasons, an order is made granting the applicant leave.
EXHIBITS AND OTHER MATERIAL RELIED UPON
On 7 July 2022, the matter came before me for hearing. The following material was relied upon by the applicant:
(a)Initiating Application dated 14 September 2021;
(b)Financial Statement of Mr Haigh dated 14 September 2021;
(c)Affidavit of Mr Haigh filed 14 September 2021;
(d)Affidavit of Mr Haigh filed 23 June 2022;
(e)Outline of Submissions filed 30 June 2022; and
(f)Outline of Case document filed 5 July 2022.
The following material was relied upon by the respondent:
(a)Financial Questionnaire of Mr Haigh dated 14 September 2021;
(b)Response to Final Orders filed 20 January 2022;
(c)Financial Questionnaire of Ms Reilly dated 20 January 2022.
(d)Affidavit of Ms Reilly dated 23 June 2022;
(e)Outline of Case document filed 30 June 2022; and
(f)Updated Financial Statement of Ms Reilly dated 5 July 2022.
FACTS, MATTERS & CIRCUMSTANCES
The applicant is 50 years of age and the respondent is 54 years of age. The parties agree that they were in a de facto relationship. They commenced cohabitation in either August or September 2006 and they separated in either 2013 or 2015.
The applicant moved into a property in Suburb B, NSW that the respondent acquired following separation from her former partner, Mr C. In 2007, the parties renovated the Suburb B property and it was sold in mid-2008.
The parties’ purchased a dilapidated property at D Street, Suburb E, NSW (‘the D Street, Suburb E property’) in May 2008. The property was purchased by the parties as tenants in common as to 25% to the applicant and 75% to the respondent. While the parties were renovating the D Street, Suburb E property, they resided in the respondent’s late-ex-husband’s property in Suburb F, between August 2008 and 2012.
The applicant funded her contributions to the purchase by way of a bank loan secured by first registered mortgage. The respondent applied funds received from her ex-husband towards the end of his life. The applicant later borrowed more money to fund the renovations and to apply to the parties’ living expenses. The respondent, now as sole trustee of her late ex-husband’s testamentary trust, lent money to herself and the applicant secured by way of a second registered mortgage.
In 2012, the parties moved into the D Street, Suburb E property. In April 2013 the parties relocated to regional NSW/Victoria and lived in a number of rental properties in Town G, Town H, Town J, Town K and Town L until July 2015. During this time, the D Street, Suburb E property was tenanted.
The respondent’s two children from a prior relationship lived with the parties during the relationship. There is a dispute as to the extent of the applicant’s contribution attributable to these children including by payment of private school fees and as homemaker and step-parent.
There are significantly contrasting accounts as to the financial and non-financial contributions and interdependency of the parties. There are mutual allegations and denials of family violence.
On or about 16 February 2016 (post-separation), the D Street, Suburb E Property was sold for $2 million. On settlement, the applicant’s home loans of $750,081 were discharged. The loan from the trust of $965,000 was repaid. After other adjustments, the balance of the proceeds of $166,787 was paid to the respondent.
At separation, the applicant says she had virtually no non-superannuation assets (a couple of motor vehicles with limited value). She retained about $200,000 in superannuation, a significant proportion of which she says had accumulated prior to the relationship.
The task of reconciliation of post-separation contributions and future needs (then and now) is somewhere between unenviable and unmanageable, and mercifully, not necessary to consider for the purposes of this application.
The NSW District Court Proceedings
On the 23 August 2021 the respondent commenced District Court proceedings against the applicant claiming damages (or alternatively, restitution) in the sum of $281,316 together with costs and interest totaling $362,591.31. The claim is for the amount required to discharge the applicant’s home loans that exceeded her 25% share of the proceeds of sale.
The NSW District Court claim is not severable from the applicant’s claim and it arises out of a common sub-stratum of facts.
THE ASSET POOL
The balance sheet for the purposes of this application is set out below. The applicant’s numbers come from her financial statement as qualified by her affidavit of 23 June 2022. The respondent’s numbers come from her financial statement.
Pool Applicant Respondent Assets Half share of M Street, Town N $300,000 $300,000 Bank Account ending #...23 $800 $800 Bank Account ending #...54 $225 $225 Motor Vehicle 1 $10,000 $10,000 Motor Vehicle 2 $30,000 $30,000 Household Contents $2,000 $2,000 Household Contents $30,000 $30,000 O Testamentary Discretionary Trust (Town P property estimate of $900,000 and breeding animals estimate of $200,000). NK NK Total Assets $373,025 + NK $360,800 $12,225 +NK Liabilities Half share mortgage of M Street, Town N $252,604 $252,604 Q Financial Services $31,492 $31,492 Credit Card loan $3,000 $3,000 R AfterPay $1,500 $1,500 R Money $3,302 Other $106,055* Total Liabilities $333,596 + NK $288,596 $109,357 +NK Net Non Super $39,429 + NK $72 204 -$97,132 + NK Superannuation Super Fund S $396,791 $396,791 Super Fund T $133,568 $133,568 Total Superannuation $530,359 $396,791 $133,568
* The respondent’s financial statement declares ‘Other’ as:
HECS Debt - $50,183.23
Centrelink Debt - $6,424.14
Broun Abrahams Burreket - $30,809.25
Turks Legal - $14,000
Suburb U Vet Hospital - $4,000
Outstanding council rates - $639
The applicant declares in her financial statement that she is employed as a Manager at the Employer V. She declares her weekly income as $2,382. The applicant has repartnered, and lives with her current partner in City W.
The respondent failed to comply with Orders made on 25 October 2021 to provide disclosure within 21 days (being 15 November 2021), then on 6 December 2021 the period was extended to 19 January 2022. Partial disclosure was provided on 14 February 2022 and 20 June 2022. The applicant deposes:
[55] On 23 June 2022, my solicitor received a link to some further disclosure material but that has not included any documents in relation to the specific requests I have made, nor evidence of [Ms Reilly’s] earnings, her tax returns, financial statements and tax returns of the [O] Testamentary Trust, business activity statements for [Ms Reilly’s] [animal breeder business], or the bank statements relating to the account(s) from which she is paying her substantial legal and accounting fees.
On 5 July 2022 the respondent filed an updated financial statement. She is a Registered Breeder ‘self-employed’ by the O Testamentary Discretionary Trust. She is the sole trustee. She and her two daughters are the beneficiaries. The trust owns the property upon which she lives and all of the breeding animals. She says her average weekly income is not known. Her personal income tax returns and trust statements have not been completed since the 2009 financial year.
At least forty-eight hours (according to the respondent) prior to the hearing the respondent served a tender bundle on the applicant of some 240 pages in length and filed it the day before the hearing. Counsel for the applicant submitted that some pages may have been attached to previous affidavits but none of them had been previously provided by way of disclosure. Ultimately, none of those pages made their way into evidence in the hearing of the application.
Counsel for the applicant submitted that there was no relevant disclosure to allow any of the assertions contained in her updated financial statement to be tested, including in particular the O Testamentary Discretionary Trust and her ‘not known’ income.
THE LAW
Ultimately, the applicant seeks an Order under section 90SM of the Act for an alteration of property interests. The applicant did not make her application within the standard application period, being 2 years after the end of the relationship (section 44(5)). Pursuant to section 44(6) of the Act, the Court may grant the applicant leave to apply after the end of the standard application period if the Court is satisfied that hardship would be caused to the applicant if leave were not granted.
The established legal principles by which the interlocutory decision must be made include:
(2)The applicant must first demonstrate hardship if deprived of the chance to bring her claim and the alleged hardship depends upon the prima facie strength of her claim.
(a)The loss of a right to institute proceedings is not of itself a hardship. It is the consequences of the loss of that right, with which the subsection is concerned. (Whitford & Whitford (1979) FLC 90-612). To show hardship one must establish a “substantial detriment” (Hall v Hall (1979) FLC 90-679 at [78626]);
(b)As to the prima facie strength of her claim, the applicable test is whether or not the applicant’s case has a “sufficient likelihood of success” (Skelton & Lindop [2022] FedCFamC1A 47 at [21]).
(3)The decision to extend time still requires an exercise of discretion in the applicant’s favour even if she first establishes hardship.
(a)Numerous factors can influence the exercise of residual discretion, including the length of the delay, the adequacy of reasons for the delay, and the prejudice the respondent would suffer if the application for the extension of time was granted (Arcand & Boen [2021] FamCAFC 155 at [40]).
(b)Whilst explanations of these factors can be highly influential in the exercise of discretion, as a matter of principle, a failure to adequately do so is not fatal to obtaining leave (see Emerald & Emerald [2018] FamCAFC 217 at [128]).
CONSIDERATION OF HARDSHIP
Under Section 4 of the Act – Interpretation:
de facto financial cause means:
(c) proceedings between the parties to a de facto relationship with respect to the distribution, after the breakdown of the de facto relationship, of the property of the parties or either of them.
The subject matter of the NSW District Court proceedings is the proceeds of the sale of the D Street, Suburb E property and the issue is entitlement to those proceeds as between the parties. The proceeds of the sale of the D Street, Suburb E property is undoubtedly property of the parties or either of them and proceedings between the parties with respect to the distribution of them is a de facto financial cause under the Act.
Under section 39A of the Act – Instituting proceedings:
(5) A de facto financial cause that may be instituted under this Act must not, after the commencement of this section, be instituted otherwise than under this Act.
The statement of claim, pleadings and particulars filed by the respondent in the NSW District Court proceedings do not refer to the Act. They do not refer to the factors prescribed by both ss 90SM(4) and 90SF(3) of the Act. I am not satisfied that the de facto financial cause would be determined under the Act.
It may be that sub-section 39A(5) is available to the applicant as a complete defence to the NSW District Court proceedings as currently pleaded, or in the alternative, to have those proceedings determined under the Act. That is obviously a matter incapable of determination for the purposes of the present application.
Under section 90RC of the Act - Relationship with State and Territory laws:
(1) In this section, de facto financial provisions means the provisions under Part VIIIAB--Financial matters relating to de facto relationships.
(2) Parliament intends that the de facto financial provisions are to apply to the exclusion of any law of a State or Territory to the extent that the law:
(a) deals with financial matters relating to the parties to de facto relationships arising out of the breakdown of those de facto relationships; and
(b) deals with those matters by referring expressly to de facto relationships (regardless of how the State or Territory law describes those relationships).
The effect of section 90RC is to provide that where federal jurisdiction applies to de facto financial matters in participating jurisdictions, state and territory laws dealing with the same subject matter are excluded.
On the evidence before me, the consequence of losing her right to have the de facto financial cause determined under the Act is that the de facto financial cause will be left for determination under the NSW state laws dealing with the same subject matter and issue. In that circumstance I find that there would be substantial detriment to the applicant and that hardship is therefore established.
Prima facie strength of the claim
As to the prima facie strength of her claim, the respondent submits that because the claim is not particularised, the likelihood of its success is unable to be assessed so the Application ought to be dismissed. There are two reasons why the claim is not particularised:
·The NSW District Court proceedings commenced well beyond the standard application period in this court, effectively forcing the applicant’s hand; and
·The respondent has not complied, to a significant extent, with her duty of disclosure. The period of time since separation that the respondent has allowed to pass before bringing her claim in the NSW District Court means that disclosure is practically a precondition to the applicant’s ability to particularise her claim under the Act.
Both of these circumstances are entirely attributable to the respondent. To allow these circumstances to operate against the applicant, particular in the fatal manner as submitted by the respondent, would be to provide a charter for abuse of process.
Further, or in the alternative, the measure of “success” is different in this case compared to the usual applications of this type. Any outcome of proceedings under the Act has reasonable prospects of being more successful than either of the two outcomes for the applicant in the NSW District Court proceedings – being either nothing, or an order against her for $362,591.32.
I am satisfied that the applicant has established that hardship would be caused to her if leave were not granted to apply after the end of the standard application period.
EXERCISE OF THE DISCRETION
Length of the delay and adequacy of reasons for the delay
The sole reason for the delay in the institution of these proceedings is because the respondent has put the applicant in the position of a defendant by instituting a de facto financial cause in a state court. I accept the applicant’s evidence that:
[5] I did not seek a Family Law property settlement with [Ms Reilly] at the end of the defacto relationship because I just wanted to move on.
[7] Until recently, I had moved on with my life and believed that the financial relationship between myself and [Ms Reilly] had been finalised.
The length of the delay in this case is more appropriately determined by the period of time between the applicant being served with the NSW District Court proceedings (on or about 23 August 2021) and the Initiating Application in these proceedings (14 September 2021) - a period of only three weeks.
The prejudice the respondent would suffer if the application for extension of time was granted
The respondent deposes that:
[10] I was not in a position (financially or emotionally) to commence the District Court proceedings earlier than August 2021 as a consequence of the relocation costs I incurred when relocating (deposed below), drought and floods on the [Region X] of NSW between late 2016 and 2021 as deposed below.
[13] Our relationship ended many years ago. I understand that [Mr Haigh] and I each moved on with our respective personal lives following our separation. I have lived in 5 different properties in the last 7 years. I have been unable to locate many of my financial records and documents and those stored in boxes were destroyed in the 2021 floods on the [Region X] of NSW.
[19] I have retained an accountant to assist me prepare my personal income tax returns and trust statements for the [O] Testamentary Trust (of which I am the sole trustee) from 2009 to the present time. My accountant requires me to employ a bookkeeper to assist inputting my accounting data into Xero software. Given the limited funds available to me, I have not been in a position to employ a bookkeeper at the present time.
[20] Once I have completed and lodged my personal tax returns I expect to have a substantial amount due and owing to the ATO for my personal income tax. I am unable to estimate this at this stage.
The respondent’s evidence in this regard is unsatisfactory. The respondent also understood that each party had moved on following separation. On her own account of separation in 2013, the standard application period expired in 2015 and before the commencement of the respondent’s unfortunate circumstances in late 2016. It appears that the respondent is in no better position (financially or emotionally) now than she was in 2015, indeed the evidence is that her position has worsened and her prospects of fulfilling her duty of disclosure are poor. The respondent has some 13 years of outstanding relevant tax returns.
None of these circumstances were brought about or contributed to by the applicant. In effect, the delay by the respondent in starting the NSW District proceedings has unfairly prejudiced both parties with respect to their claims for property relief.
In the exercise of the Court’s discretion, I am satisfied that it is appropriate to grant leave to apply after the end of the standard application period.
I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansfield. Associate:
Dated: 1 September 2022
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