Keith and Soukis

FAMILY COURT OF AUSTRALIA

KEITH & SOUKIS

[2007] FamCA 1017

FAMILY LAW - APPEAL - PROPERTY - Application for leave to initiate proceedings out of time

Family Law Act 1975 (Cth) ss 44, 78, 79

Rutherford & Rutherford (1991) FLC 92-255
Whitford & Whitford (1979) FLC 90-612
G and G [1999] FamCA 240
Carlon and Carlon (1982) FLC 91-272
Good and Good (1982) FLC 91-249
Catlin & Kent (1987) FLC 91-815
Neocleous and Neocleous (1993) FLC 92-377
PVO v RMO [2005] FamCA 1196
De Winter v De Winter (1979) FLC 90-605
Althaus and Althaus (1982) FLC 91-233
Howard and Howard (1982) FLC 91-234
Allesch v Maunz (2000) FLC 93-033

APPLICANT:

MR KEITH

RESPONDENT:

MS SOUKIS

FILE NUMBER:

CAF

536

2005

APPEAL NUMBER:

2006

DATE DELIVERED:

31 August 2007

PLACE DELIVERED:

Canberra

JUDGMENT OF:

BRYANT CJ, FINN & BOLAND JJ

HEARING DATE:

5 October 2006

LOWER COURT JURISDICTION:

Family Court of Australia

LOWER COURT JUDGMENT DATE:

30 January 2006

LOWER COURT MNC:

[2006] FamCA 11

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Ms Tonkin

SOLICITORS FOR THE APPLICANT:

James Gralton

NO APPEARANCE FOR THE RESPONDENT

Orders

That the application by the husband for leave to appeal be granted.
That the appeal be allowed.
That the orders of the Honourable Deputy Chief Justice Faulks of 30 January 2006 be set aside.
That the husband be granted leave pursuant to s 44(3) of the Family Law Act 1975 (Cth) to institute proceedings for settlement of property within 14 days of the date of this Order, and thereafter serve any such proceedings together with a copy of the reasons for judgment and the Orders of this Honourable Court upon the Wife without delay.
That the Court grants to the appellant husband a costs certificate pursuant to the provisions 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 husband in respect of the costs incurred by the appellant in relation to the appeal.

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Full Court delivered this day will for all publication and reporting purposes be referred to as Keith and Soukis.

FAMILY COURT OF AUSTRALIA AT CANBERRA

Appeal Number: EA 21 of 2006
File Number: CAF 536 of 2005

MR KEITH

Applicant

and

MS SOUKIS

Respondent

REASONS FOR JUDGMENT

Introduction

The parties who had married in 1976 were divorced [in December] 2001. No formal proceedings for settlement of property were brought within the statutory time frame (one year after decree absolute).
On 14 October 2005, three years and nine months after the decree absolute the husband filed an application seeking leave to institute proceedings out of time.
On 30 January 2006 Faulks DCJ dismissed his application for leave and the husband seeks leave to appeal that decision.
The matter proceeded before us on the assumption and without argument that leave is required to appeal an order made in proceedings seeking leave under s 44(3) of the Family Law Act 1975 (Cth) (“the Act”) to institute out of time proceedings to which the sub-section relates.
The husband’s application for leave to appeal was argued together with his substantive appeal in circumstances where it was accepted that leave would granted where an error of principle or substantial injustice to the husband is established (Rutherford & Rutherford (1991) FLC 92-255).
The hearing of this matter proceeded in the absence of the respondent wife. The wife was served with relevant documents relating to the appeal but failed to appear for the hearing of the appeal.

Background

The parties were married on [in May] 1976 and separated under one roof in mid-2000. On 18 September 2000 the husband transferred his interest in the former matrimonial home (“the matrimonial home”) to the wife. The property was previously held in joint names by the parties. A decree nisi was granted on the wife’s application [in December] 2001.
On 14 October 2005 the husband filed an application for final orders in which he sought the following orders being a declaration under s 78 of the Act and consequential orders:
1.That there be a declaration that the respondent wife holds her interest in the property known as [the L property] in trust for the parties as tenants-in-common in equal shares.
2.That the respondent wife do all things necessary to transfer to the applicant husband a one half share as tenant-in-common of the L property, including but not limited to signing a transfer document when tendered by the husband and producing certificate of title …to the Registrar General to allow for registration of the transfer.
3.That when called upon to do so by the applicant husband, the respondent wife do all things necessary to cooperate in and effect a sale of the L property and to divide the net proceeds of sale equally between the husband and the wife.
4.That in the event of a failure to agree between themselves the parties have liberty to apply as to the timing, method or any other aspect of the sale of the L property.
Also on 14 October 2005 the husband filed an application in a case in which he sought the following orders:
1.That the respondent husband be granted leave to proceed in this matter, although out of time.
2.That until further order, the respondent wife be restrained from dealing with or encumbering the property known as [the L property] whether by gift, sale, transfer, pledge, charge or any other means.
3.Directions for final hearing.

The issues before the trial Judge

The hearing before the trial Judge proceeded on the basis that the husband’s case was one in which he was seeking leave to bring proceedings under s 79 for property settlement, although what orders he seeks if he is granted leave is not entirely clear.
Although the application made no specific reference to s 79 of the Act, Counsel for the husband referred to s 79 proceedings during submissions. The trial Judge (at paragraph 34 of the reasons for judgment) refers to the husband seeking leave to commence proceedings for “some division of property” and it appears clear enough that the trial Judge and Counsel proceeded on the basis that the husband was pursuing leave to bring proceedings pursuant to s 79 of the Act. The hearing proceeded on the basis that if leave were granted such proceedings would necessarily include the matrimonial home, now transferred to the wife, as part of the property of the parties to be divided.
The orders sought in the husband’s application for final orders filed 14 October 2005 would appear to be orders pursuant to s 78 of the Act seeking a declaration of existing beneficial interests and consequential orders. Leave under s 44(3) of the Act is not necessary for a declaration of existing beneficial interests, but no submissions were made to his Honour or to us concerning the status of this application and the proceedings before his Honour proceeded on the basis that leave was sought to make an application for a division of property pursuant to s 79 of the Act. We observe however that his Honour’s orders did not purport to dismiss that application.
How that application fits with the application for leave, or whether it is intended to be entirely independent of it, is unclear. Neither Counsel nor the trial Judge referred directly to it and it is unclear to us whether his Honour turned his mind to the existence of the application at all, or what its current status is.
However, there is no specific ground of appeal that his Honour failed to take account of the application and as its relevance is raised in one of the other grounds we will address it under that ground.
Proceedings before the trial Judge were complicated by the wife’s attitude to the application. First, she was unrepresented at the hearing before his Honour and required an interpreter. Secondly, she adopted a position that the Court could not conceivably entertain the husband’s application and finally, when ordered to do so by the trial Judge on 9 December 2005, she failed to permit a valuer to come to the home to conduct a valuation. His Honour had adjourned the proceedings from 9 December 2005 until 16 January 2006 to enable the wife to seek legal advice and if she wished, to have a lawyer represent her on the adjourned date. When the matter returned to Court the wife failed to appear in person or by a lawyer and his Honour was informed that the wife had failed to comply with his Orders to permit the valuer to conduct a valuation of the former matrimonial home.
His Honour then allowed brief submissions, reserved his decision, and delivered judgment and made orders dismissing the husband’s application for leave to institute proceedings out of time on 30 January 2006.

The judgment

In his judgment, his Honour noted that:
§ The former matrimonial home was originally in joint names but the husband’s interest had been transferred to the wife on 18 September 2000, at about the time of disintegration of the parties’ marriage;
§ The wife asserted the transfer took place in consideration of her agreeing to divorce him, while the husband asserted it was because of harassment or something akin to duress from her;
§ At the time of separation (or at least at the time of divorce) the husband had about $105,000 in two bank accounts;
§ Since 2001, it was agreed the husband had accumulated about $85,000;
§ Substantial contributions were made by the wife and the husband also made contributions.
His Honour referred to Jacenko v Jacenko (1986) FLC 91-776 and specifically the following extract:-
…[T]he applicant must establish three principal matters: first, a reasonable prima facie case for leave, had she instituted proceedings in time; secondly, the denial of the wife’s claim would cause her hardship; and thirdly, an adequate explanation as to her delay.
His Honour further noted that in Jacenko (supra) the Full Court held that in appropriate cases the degree of hardship to be suffered by the applicant “may well outweigh an inadequate explanation of delay” (paragraphs 18-19).
At paragraph 20, his Honour held himself as bound to look only to the evidence of the applicant in determining whether there was a prima facie case, noting that although the applicant had given evidence in relation to his contributions to the marriage, “the factual matrix into which a determination of matters pursuant to sections 79(4) and 75(2) of the Family Law Act 1975 could be placed is far from complete”. His Honour noted that this was partly due to the respondent’s refusal to permit the applicant to value the subject property (paragraph 21).
His Honour did acknowledge that at the date of separation and currently, both parties severally owned property which could be the subject of a division of property. His Honour expressly noted that it was clear from the evidence adduced by the applicant that there was some contribution made by him to that property. His Honour went on to note (at paragraph 24):-
At the time of separation and indeed now the applicant has property but its relationship to the whole of the pool of property or indeed to the contributions either of the parties have made to any of the property is not clear. To a substantial extent this situation is affected by Ms [Soukis]’s refusal to permit a valuation of her real estate.
Whilst acknowledging that there was not enough evidence to make a determination of how the property of the parties might be divided, his Honour said that this was due in part to the behaviour of the respondent wife in failing to permit the valuation of the property to be carried out and for this reason he was prepared to find that a prima facie case for the division of property existed (paragraph 27). His Honour then turned to examine the husband’s explanation for the delay.
It was submitted on the applicant husband’s behalf that he transferred his interest in the matrimonial home to the wife in September 2000 to alleviate her harassment of him whilst he was ill. The husband further deposed to being unaware of the legal implications of his divorce in December 2001. He denied receiving any notice of time limitations with his certificate of divorce (paragraph 29).
His Honour noted the husband’s evidence that “some two years later”, presumably following the divorce and transfer, the husband had attempted to have the wife sign the property back to him, but she had refused. The husband obtained legal advice in October 2003. The husband’s assertion, noted by his Honour, was that he did not file proceedings because he was concerned about the wife’s health (at paragraphs 30 to 32).
After noting these matters, his Honour then turned to a consideration of hardship to each party (at paragraphs 33 to 34):-
Neither of the parties has much in the way of money and there is no doubt that if I were to reopen the proceedings each of them would be obliged to spend some sort of money on collecting the relevant evidence and putting it before the Court. This would certainly constitute a hardship to Ms [Soukis] but I suppose that that might be remedied by an appropriate order procuring some of the liquid funds held by Mr [Keith] as security for the costs of the proceedings. Ms [Soukis] has on her statement at least spent money to improve the house since the parties were divorced. This money appears to have included some furniture which would not significantly affect the outcome but she would be entitled to say with some justification in this matter that she had made it abundantly clear to Mr [Keith] for some years that she did not agree with any suggestion that he would be entitled to any part of the property. She could reasonably argue that as he did nothing about it notwithstanding that along the way he obtained legal advice about what he might do that he should now be estopped from claiming anything from her.
For his part Mr [Keith] if not granted leave would have lost the opportunity to test whether or not some division of property between them would be appropriate. On one version of these matters, provided her costs in relation to the examination of the situation were satisfactorily guaranteed, Ms [Soukis] ultimately could not be disadvantaged by a determination of what the rights of the parties might be. That is of course unless it were determined that she had to sell the house to make some financial provision for Mr [Keith]. It is common ground that she does not work and by any measure this sale must constitute a hardship. This is in circumstances where Mr [Keith] was aware by formal legal advice that he ought to bring proceedings and did not do so for some years.
His Honour’s conclusion as to the husband’s application is contained in paragraph 35 of the judgment:-
On balance, in my opinion, the hardship constituted to Ms [Soukis] exceeds the hardship that might be occasioned to Mr [Keith]. The recalcitrant, offensive and obstinate attitude of Ms [Soukis] in relation to these proceedings does not help to engender sympathy for her cause. Nevertheless in my opinion Mr [Keith]’s application should be refused. While for the reasons I have set out above I am prepared to find in the circumstances of this case that he had a prima facie case, his explanation for the delay was significantly less than satisfactory and in the end, in my opinion the hardship that would be occasioned to him by a failure on my part to grant leave would be exceeded by the hardship that would be occasioned to the respondent. For these reasons therefore in my opinion the application should be refused.

Grounds of appeal

The husband’s Counsel did not seek to rely upon ground four of the grounds set out in the Notice of Appeal filed on 27 February 2006. The remaining grounds of appeal provide:-
1.The learned judge erred in law in acting upon a wrong principle in that he determined the matter on the balance of hardship rather than in accordance with established principles;
2.The learned judge erred in law in acting upon a wrong principle and/or in failing to properly exercise his discretion by failing to consider whether the hardship to the applicant outweighed his explanation for the delay.
3.The learned judge erred in failing to make any finding as to whether and [sic] not the explanation for the delay was adequate or not.
4.…
5.The learned judge erred in finding that as at the time of the divorce (13 December 2001) or separation the applicant had about $105,000 in two bank accounts and since then had accumulated about $85,000, whereas the evidence disclosed that at the time of the divorce the applicant had about $20,000 and had about $105,000 when proceedings were commenced on 13 October 2005.

Applicable principles

Subsection 44(3) of the Act provides that:-
(3) Where, whether before or after the commencement of section 21 of the Family Law Amendment Act 1983:
(a) a divorce order has taken effect; or
(b)a decree of nullity of marriage has been made;
proceedings of a kind referred to in paragraph (c),(caa), (ca) or (cb) of the definition of matrimonial cause in subsection 4(1) (not being proceedings under section 78 or 79A or proceedings seeking the discharge, suspension, revival or variation of an order previously made in proceedings with respect to the maintenance of a party) shall not be instituted, except by leave of the court in which the proceedings are to be instituted or with the consent of both of the parties to the marriage, after the expiration of 12 months after:
(c)in a case referred to in paragraph (a) – the date on which the divorce order took effect; or
(d)in a case referred to in paragraph (b) – the date of the making of the decree.
The Court may grant such leave at any time, even if the proceedings have already been instituted.
Subsection 44(4) goes on to state that the Court shall not grant leave pursuant to subsection (3) unless it is satisfied:-
(a)that hardship would be caused to a party to the relevant marriage or a child if leave were not granted; or
(b)in the case of proceedings in relation to the maintenance of a party to a marriage – that, at the end of the period within which the proceedings could have been instituted without the leave of the court, the circumstances of the applicant were such that the applicant would have been unable to support himself or herself without an income tested pension, allowance or benefit.
In Whitford & Whitford (1979) FLC 90-612, the Full Court (Asche & Pawley SJJ and Strauss J) identified the “two broad questions” which arise for determination on an application for leave pursuant to subsection 44(3) (at 78,144):-
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.
The Court went on to state in Whitford (supra) that the hardship reference in subsection 44(4) of the Act is not a reference to the loss of a right to institute proceedings, but rather a loss of that opportunity where it is clear to the Court that:
…[T]he 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.

Ellis J in G and G [1999] FamCA 240 interpreted the test in Whitford (supra) in the following terms (at paragraphs 22 and 23):
It can thus be seen that proof of hardship is a necessary pre-condition to the exercise by the Court of its discretion. The generally accepted interpretation of hardship, in the context of s.44(3), is “substantial detriment”. The loss of the right to institute the proceedings itself, however, is not hardship within the meaning of the section. Fundamental to the inquiry as to hardship is, as was said in Frost and Nicholson (1981) FLC 91-051, whether the applicant has a reasonable claim to be heard by the Court. That is not by itself necessarily the same thing as hardship but the stronger the applicant’s prima facie case, the greater the likelihood of hardship if leave were refused.
Nothing which has been put on behalf of the husband under the first of the three headings, in my view, demonstrates that the trial Judge erred as asserted. In my view, it was open to him to conclude that hardship would be caused to the wife if leave were not granted. In the ultimate, the trial Judge found that the claim of the wife was a small claim but that must be viewed, in my judgment, in the light of the circumstances, including the financial circumstances of each of the parties at the date of the hearing.
As to the explanation for delay, the Full Court stated in Carlon and Carlon (1982) FLC 91-272 (at 77,533):-
[I]t is in our judgment a correct statement of the law that while Parliament in sec. 44(4) has placed a fetter on the discretion of the Court, the Court itself should not and probably cannot do the same by laying down any strict principles such as that a party must give an adequate explanation for delay. Once hardship has been established in the sense referred to in Whitford (supra) then the Court is in the exercise of its discretion at large and should take into account all relevant facts including, if that be the case, that no or no satisfactory explanation has been given for delay. Such a position namely no or no satisfactory explanation for delay is no more than another factor which must be given appropriate weight in the exercise of discretion.

Discussion of grounds of appeal

Ground 1: The learned trial Judge erred in not determining the matter in accordance with established principles

His Honour determined that the husband had established a prima facie case for a determination pursuant to section 79 of the Act. His Honour’s decision to refuse the husband’s application was premised upon a view that the hardship to the wife would exceed that occasioned to the husband. Further, that imbalance was taken to be strengthened by his Honour’s finding that the husband’s explanation for the delay in initiating the proceedings was less than satisfactory. Whilst his Honour’s view of the husband’s explanation as to the delay is sustainable, his finding that the wife’s hardship outweighed that of the husband is vulnerable to criticism. Having found a prima facie case existed, his Honour was then bound to consider whether hardship would be caused to the husband if leave was not granted.
It was submitted that the learned trial Judge failed to properly assess the hardship caused to the husband of refusing leave, in circumstances where:-
·the learned trial Judge found the husband had a prima facie case;
·the parties’ marriage lasted 25 years;
·the husband had transferred his interest in the parties’ only significant asset to the respondent for no consideration;
·the husband asserted he was under duress;
·the husband had made significant contributions to the acquisition, conservation and improvement of the property;
·both parties were currently living in the matrimonial home; and
·the husband sought a final resolution to the dispute between the parties.
It was further submitted that the learned trial Judge misdirected himself by focusing upon the hardship to the wife in circumstances where there was no evidence before the Court of the wife’s financial circumstances, or upon which the trial Judge could conclude, if the matrimonial home was sold, whether a sale would constitute hardship to the wife.
We think that there is much force in these submissions. Having decided that there was a prima facie case, the trial Judge did not adequately consider the hardship to the husband in being unable to pursue his application. Indeed his Honour’s focus appears to have been almost entirely upon the wife’s position. His Honour makes the following comments about hardship to the wife:
§ “[e]ach of them would be obliged to spend some sort of money on collecting the relevant evidence and putting it before the Court”;
§ “This would certainly constitute a hardship to Ms [Soukis] but I suppose that that might be remedied by an appropriate order procuring some of the liquid funds held by Mr Keith as security for the costs of the proceedings”;
§ “Ms [Soukis] has on her statement at least spent money to improve the house since the parties were divorced…. she would be entitled to say with some justification in this matter that she had made it abundantly clear to Mr [Keith] for some years that she did not agree with any suggestion that he would be entitled to any part of the property. She could reasonably argue that as he did nothing about it notwithstanding that along the way he obtained legal advice about what he might do that he should now be estopped from claiming anything from her”;
§ “…Ms [Soukis] ultimately could not be disadvantaged by a determination of what the rights of the parties might be. That is of course unless it were determined that she had to sell the house to make some financial provision for Mr [Keith]. It is common ground that she does not work and by any measure this sale must constitute a hardship”
In terms of the hardship to the husband, his Honour simply identified (at paragraph 34):
For his part Mr [Keith] if not granted leave would have lost the opportunity to test whether or not some division of property between them would be appropriate.
His Honour then decided that on balance the hardship constituted to the wife would exceed that which would be occasioned to the husband.
As Counsel submitted to us in relation to the hardship to the wife in funding any proceedings, his Honour himself identified that any hardship to the wife could be remedied by an appropriate order providing for a payment of funds from the husband’s liquid funds.
As to money spent by the wife on the property since its transfer to her, his Honour failed to note that this could be remedied in any s 79 proceedings, either as going to the question of contribution or alternatively under s 75(2)(o) and thus it is difficult to see how the wife could ultimately be prejudiced if her contributions were taken into account.
Finally, as to his Honour’s finding that the wife would suffer hardship if the matrimonial home were sold and she had to make provision for him, the husband submits that not only was there no evidence of hardship to the wife, a proposition with which we agree, but his Honour failed to take account of the husband’s evidence that he would not seek a sale while she wished to live in the matrimonial home. We will return to this point.
As is apparent from paragraph 34, his Honour identified the only hardship to the husband as losing only “the opportunity to test whether or not some division of property between them would be appropriate”. This seems at odds with his Honour’s finding (at paragraph 27) that the husband had a prima facie case for settlement of property. Logically then, the husband would have lost not just the opportunity to “test” whether or not some division of the property would be appropriate but the opportunity to pursue an application for property settlement including his entitlement in the matrimonial home for which his Honour found him to have a prima facie case.
The marriage had been a lengthy one of 25 years and on the evidence of the husband, which was not contested by the wife, both had contributed to the acquisition, conservation and improvement of the matrimonial home until it was transferred to the wife. It was transferred to the wife in 2000 for no consideration. Having found a prima facie case, in our view the husband would lose much more than the opportunity to “test whether or not some division of property would be appropriate”. We think there is much force in the argument of the husband that his Honour did not articulate what the hardship to the husband might be. His Honour knew that the husband had some savings, $85,000 of which had been accumulated since separation. He did not know, because the wife would not allow it, what was the value of the matrimonial home. Even allowing for a sale, which his Honour found would constitute a hardship to the wife, in our view his Honour could not reasonably speculate that the wife’s hardship would be more than that of the husband especially if the husband’s savings were to play a significant part in the division of property. On the other hand, the husband would lose the opportunity to pursue a potentially substantial claim in which he had prospects of success.
The husband further contends that his Honour failed to consider relevant facts. Those facts were that the parties were both currently living in the matrimonial home and that the husband had filed an application seeking a declaration that he had an interest as a joint tenant in the property. His Honour did not mention the application for a declaration at all. It seems to us that if leave were not granted and the husband were to pursue that application and be successful, the wife would be significantly worse off. The husband would retain his savings without having to account for them and would be at liberty to pursue his remedies as a co-tenant at law and the wife could be significantly disadvantaged. There was evidence before the Court that the husband had lodged a caveat on the matrimonial home claiming an equitable interest by way of constructive trust.
Considering the consequences of a loss of opportunity to pursue a claim for relief under s 79, in Good and Good (1982) FLC 91-249 the Full Court said (at 77, 377):
[S]ec. 79 issues flow naturally and almost inevitably from the determination of rights and interests under sec. 78. That is one reason why the Court encourages resort to sec. 79 rather than, or at least in conjunction with sec. 78. Very few cases can be finally and satisfactorily determined under sec. 78.
In Catlin & Kent (1987) FLC 91-815 the Full Court dismissed an appeal against an order granting the wife leave to institute property proceedings many years out of time. The respondent had contended that as the wife sought a declaration under s 78 that matter should be determined first. The Full Court in dismissing the appeal said (at 76,152):
[T]he Court has indicated its reluctance to embark upon a determination of sec. 78 issues alone, and why it leans towards linking sec. 78 and 79 issues in one hearing (Good and Good (1982) FLC 91-249; (1982) 8 Fam. L.R. 18). The question of legal and equitable ownership and entitlements is always relevant in sec. 79. For similar reasons, leave under sec. 44(3) to institute proceedings under sec. 79 may not always be necessary if there are proceedings pending under sec. 78 which raise issues for determination between the parties, Good and Macura and Macura (1982) FLC 91-252.
Further at page 76,152 the Full Court said:
Under sec. 78, however, the Court can consider only the actual legal effect of the transaction; while the parties’ intentions may be relevant, the fairness or unfairness of the transaction, as a settlement of their matrimonial affairs does not arise for determination.
In our view the failure to consider or deal with the ramifications of the husband’s application for a declaration of trust under s 78, in the event it was successful, renders his Honour’s findings about hardship to the wife unsafe. In failing to consider its potential effect, his Honour failed to consider a relevant matter to the question of hardship between the parties.
Further his Honour failed to take account of the husband’s evidence that he was not proposing that the matrimonial home should be sold for as long as the wife wished to live there (husband’s affidavit paragraph 36). An acknowledgment of the husband’s concession that he was seeking an interest in the property but not one he would seek to realise whilst the wife wished to remain living at the house, in our view, renders his Honour’s finding that hardship would be created to the wife if she had to sell the matrimonial home to make some financial provision for the husband, untenable. The husband’s evidence on this point was not challenged.
In Neocleous and Neocleous (1993) FLC 92-377, the Full Court said (at page 79,918):
The meaning of the word “hardship” in s. 44(4) has been the subject of some discussion in the earlier cases decided under the section, but the generally accepted meaning now is “a substantial detriment” (see Whitford and Whitford (supra) at FLC p78,144; Hall and Hall (1979) FLC 90-679 at p78,627; and Frost and Nicholson(1981) FLC 91-051 at p. 76,423).
In Whitford (supra) at page 78,145, the Full Court said:
Hardship may be caused to an applicant if leave were not granted to institute proceedings, although the applicant is not in necessitous circumstances. Whatever the financial situation of an applicant may be, his or her loss of a prospective entitlement to property including money, or his or her inability to have the financial and property relations of the parties adjusted or resolved, may constitute hardship.
The Full Court in Whitford (supra) pointed out that it was not the loss of the right to pursue the claim which constituted “hardship” but the consequences of loss to the applicant in those particular circumstances.
We consider that in the particular circumstances of this case in specifically omitting to consider the husband’s application for a declaration, and the fact that the evidence of the husband was that the wife could continue to occupy the matrimonial home for as long as she was able to do so, the trial Judge failed to properly consider the effect of hardship to the husband in not being able to pursue his entitlement under s 79 and erroneously assessed hardship to the wife, in circumstances which resulted in appellable error.

Ground 5: The learned trial Judge erred in making errors of fact which materially affected his decision to refuse leave

In determining whether or not an error of fact constitutes a ground for setting aside a discretionary judgment, Counsel for the appellant sought to rely upon PVO v RMO [2005] FamCA 1196 and statement of Gibbs J in De Winter v De Winter (1979) 23 ALR 211; FLC 90-605 cited therein:-
It may in some cases appear that the mistake of fact has not affected the final result, or that its effect has been negligible, or that in any case the conclusion reached was correct, notwithstanding the error…. The question is whether the invalid reason has influenced the ultimate conclusion, or whether the error was immaterial; if the error did affect the conclusion, the result may nevertheless be so plainly right that it can be allowed to stand notwithstanding the unsoundness of some of its foundations.
The appellant submitted that his Honour erred in finding that at the time of separation the husband had approximately $105,000 in two bank accounts and had accumulated a further $85,000 in the period since 2001. The evidence in fact reflected that the husband had saved approximately $20,000 in the period following separation and now held a total of $105,000. The husband’s affidavit at paragraph 34 says:
By the time of our divorce at the end of 2001 I had saved about $20,000 and since then I have continued to save so that I now have $105,000.
His Honour found, that at the time of separation, the husband had “$105,000 in two bank accounts” (at paragraph 12). His Honour further found that “[s]ince 2001, it was agreed that he had accumulated about $85,000”. It is submitted that the learned trial Judge’s findings of fact inferred that the appellant had a total of $195,000. In our view that is certainly one interpretation that could be placed upon the findings of the trial Judge. But in addition, it appears that his Honour was of the mistaken belief that the evidence indicated that at the date of separation the husband had about $105,000 in two bank accounts, when in fact the evidence was that he had about $20,000.
It is not clear how this error ultimately affected the trial Judge’s conclusions about hardship. He may have believed that the husband had significantly greater assets than was actually the case. Alternatively, his Honour may have believed that as the husband had significant assets at separation, the transfer of the matrimonial home was, in essence, for valuable consideration.
In his reasons for judgment at paragraph 24, his Honour said:
At the time of separation and indeed now the applicant has property but its relationship to the whole of the pool of property or indeed to the contributions either of the parties have made to any of the property is not clear.
In view of the evidence we cannot be satisfied that this mistake of fact did not affect the final result and in particular the issue of hardship and thus this ground also has merit.

Ground 2 & 3: The learned trial Judge erred in failing to consider whether the hardship caused to the appellant outweighed his explanation for delay and erred in failing to determine whether the delay was inadequate.

The trial Judge was required to consider whether hardship to the husband “outweighed an inadequate explanation for delay”: Althaus and Althaus (1982) FLC 91-233; Howard and Howard (1982) FLC 91-234.
His Honour considered the summary by the husband’s Counsel of his evidence which his Honour set out at paragraph 29 of his reasons for judgment:
[T]he applicant describes a highly conflictual environment between he [sic] and the wife coloured by illness of himself, quite significant illness of himself such that he would say that he was harassed. Whether he could use the word duress Your Honour, I’m not sure but he was harassed into the situation where he thought it would keep the peace to transfer the property and he signed the document, the transfer.
His Honour notes that some two years after the decree absolute the husband attempted to use “non-litigious methods of reaching agreement” with his former wife. He observes (at paragraph 30) that the husband says he asks on at least ten different occasions for the wife to sign the property back to him and his Honour points out that he said to Counsel:
… [I]t must have been fairly clear, if not after the first time after the following nine times, that this was not something that was going to happen simply because it [sic] wanted it to.
His Honour further observes (at paragraph 31) that the husband eventually obtained legal advice in December 2003 and still did not bring proceedings until some time after that time.
His Honour then makes no findings about the inadequacy of the explanation but simply says in paragraph 35:
While for the reasons I have set out above I am prepared to find in the circumstances of this case that he had a prima facie case, his explanation for the delay was significantly less than satisfactory and in the end, in my opinion the hardship that would be occasioned to him by a failure on my part to grant leave would be exceeded by the hardship that would be occasioned to the respondent.
His Honour gave no reasons for finding that the husband’s explanation was “less than satisfactory”, or indeed whether he considered it “inadequate”. He made no findings about whether he accepted the husband’s explanation or not, or even part of it, or the effect of the delay itself on the wife.

Whilst his Honour says that granting leave would cause hardship to the wife, there is in fact no evidence that this would be so, especially once the husband’s agreement to the wife continuing to live in the matrimonial home is included. We agree with the submissions of the appellant that in focusing upon the hardship which may be occasioned to the wife, his Honour failed to consider whether, even absent an adequate explanation for the delay, the hardship to the husband outweighed it. This was in circumstances where his Honour appears to have overlooked evidence directly relevant to the question of hardship. This too is an appealable error.
Given our conclusions that there is substance in the grounds of appeal and our reasons for those conclusions, it follows that we must grant leave to appeal and allow the appeal.

Re-exercise of discretion

The order sought by the husband in his draft Notice of Appeal was that the order be set aside and the matter be listed for re-hearing before a single Judge of the Family Court. At the hearing of the appeal, the husband submitted that if the appeal was successful then the Full Court should re-exercise the discretion. The husband did not seek to put any further evidence before the Court (Allesch v Maunz (2000) FLC 93-033).
We are satisfied from the evidence before his Honour that the husband has established a prima facie case for settlement of property. The husband’s evidence was that the matrimonial home was the main matrimonial asset and that his savings had nearly all been accumulated since separation. He sought leave out of time to commence proceedings and to have a one half interest in the property transferred to him as tenant-in-common. He established from uncontroverted evidence :
§ The parties lived together from the date of the marriage in… 1976 and continued to live together at the time of the hearing;
§ Shortly prior to the marriage, he had purchased a block of land worth approximately $10,000 which he had paid for from his savings;
§ He then built a house on the block of land to lock up stage;
§ Shortly after the marriage, a further sum was borrowed and used to complete the house and the parties thereafter resided in the house;
§ In late 1976, or 1977 he transferred the property into joint names;
§ During the marriage he worked …and used his earnings to repay the mortgage and household expenses;
§ In 1979 the parties sold that property, purchased another vacant block of land, went on an overseas holiday and then built the matrimonial home on the property now the subject of the application;
§ The block was purchased in joint names and further borrowings from the Commonwealth Bank were made;
§ He accepts the wife assisted in the construction of the home and worked to establish the garden;
§ The wife worked for part of the marriage;
§ There were no windfalls in the nature of inheritances, lottery wins or superannuation payouts, except for receipt by him of $2,900 from his uncle’s estate;
§ At the time of the divorce at the end of 2001, he had savings of $20,000;
§ The wife’s affidavit indicates that she paid approximately $5,000 from her savings towards the construction of the home;
§ That she put a lot of work and effort into improving the home and landscaping after the marriage;
§ That she cared for and looked after the matrimonial home and him during the marriage;
§ He transferred his interest in the former matrimonial home to the wife on 18 September 2000 for no consideration. The transfer was not pursuant to any order or binding financial agreement between the parties;
§ He now has savings of $105,000.
There is no evidence of the value of the home or the wife’s financial circumstances. There has been no application for property settlement between the parties. In the circumstances and given the evidence as to the contributions made by both parties but particularly by the husband to the acquisition, conservation and improvement of the assets known to the Court, we are satisfied that the husband has a prima facie case for settlement of property.
The value of the matrimonial home is unknown but that is not the fault of the husband, as the trial Judge correctly pointed out. He ordered the wife to facilitate a valuation and she refused. Absent that evidence we are unable to find other than that the husband has a prima facie case for settlement of property and in particular a claim to a half interest in the matrimonial home.

Would there be hardship to the husband if leave were not granted ?

In our view there would be hardship to the husband. The husband would be prevented from making a claim to a significant asset to which he contributed substantially during a lengthy marriage, in circumstances where he had modest savings at the time that he transferred the matrimonial home to the wife and he did so for no consideration.

Hardship to the wife

It is difficult to adequately assess hardship to the wife because the wife failed to provide to the Court any information about her current financial position or about the value of the property. To that extent she then cannot be heard to complain if the evidence does not enable the Court to find any hardship to her.
We take into account, in addition, that the husband’s evidence is that he seeks a transfer of an interest in the matrimonial home as tenant-in-common and that he deposes to the fact that he would be prepared to move out and live somewhere else if the transfer took place. His evidence is that he would assist the wife in selling the house if she wished to do so but that otherwise he would not insist upon a sale of the matrimonial home for as long as the wife wishes to live there.
At the present time the parties are living in the matrimonial home together. Given the husband’s evidence as to his intention as expressed and the failure of the wife to put any further evidence before the Court, we are unable to find that there would be any hardship to the wife if leave were now granted to the husband. To the extent that the wife may have relied upon the fact that the matrimonial home was transferred to her, we observe the following:
(a)That the Court can take into account contributions to the improvement of the property or payments made to the property either under s 79(4) or s 75(2); and
(b)That the husband is in any event still residing in the home with the wife.

Reason for the delay

There is a dispute on the evidence between the husband and wife as to the reason for the transfer.
The husband asserts that he transferred the matrimonial home to the wife as a consequence of the wife’s harassment of him. The wife asserts that it was transferred to her in consideration of her agreeing to divorce him.
In our view it matters little which of these explanations is ultimately found to be accurate. The husband asserts that he was unaware of the implications of the legislation about property settlement following a divorce. The husband in particular asserts that he did not receive a copy of the decree nisi and therefore and did not receive notice of the time which he had to bring an application.
The husband asserts that he sought legal advice in October 2003. If we accept his evidence, it was at least two years after the transfer, or in October 2003, that he became aware that he may need to commence proceedings for leave to proceed out of time and we infer that from that date onwards he was aware that he needed to bring an application to proceed out of time. The husband asserts that he raised with the wife the issue of transferring the matrimonial home back into joint names but it was not until April 2005 that he returned to see his solicitor and letters were written to the wife. There is no further explanation as to why it took a further nine months before he brought an application.
We agree with his Honour that the husband’s explanation is not compelling. However, we are not satisfied that there is any evidence that the wife has suffered any hardship as a result of the effluxion of time. That is to say, that there is no evidence of further detriment to the wife occasioned by the delay since October 2003 when the husband received legal advice and can be taken to have known about the need to seek leave. Certainly if there is any, it is not in our view detriment which could not be taken into account by the Court under s 75(2)(o) in any property proceedings.
Having regard to what we have found to be a prima facie case and the hardship to the husband if he were prevented from bringing an application, we are satisfied that the hardship he would suffer if he were not granted leave outweighs any inadequate explanation of delay. Accordingly, we would give leave pursuant to s 44(3) to institute proceedings for settlement of property. Such proceedings should be filed within 14 days of the date of this Order and served upon the wife together with copies of our orders and reasons for judgment.

The costs of the appellant

The appeal having succeeded, the appellant should receive the appropriate cost certificate pursuant to the Federal Proceedings (Costs) Act 1981(Cth).

I certify that the preceding eight-three (83) paragraphs are a true copy of the reasons for judgment of the Full Court.

Associate:

Date: 31 August 2007

[2007] FamCA 1017

31 August 2007

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