Krueger & Krueger
[2023] FedCFamC1A 203
•21 November 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Krueger & Krueger [2023] FedCFamC1A 203
Appeal from: Krueger & Krueger [2023] FedCFamC2F 1009 Appeal number: NAA 191 of 2023 File number: PAC 1280 of 2019 Judgment of: CHRISTIE J Date of judgment: 21 November 2023 Catchwords: FAMILY LAW – APPEAL – Application for leave to appeal – Appeal against orders dismissing an application for leave to commence proceedings out of time – Where the appellant had given evidence on behalf of his brother in his brother’s litigation against the respondent in the New South Wales Supreme Court – Where the appellant’s brother’s claim was partially successful such that the respondent was ordered to pay monies to the appellant’s brother – Where the primary judge found that the appellant had improperly acted to diminish the pool of assets available for distribution between the parties – Where the finding was not open to the primary judge – Leave to appeal granted – Appeal allowed – Re-exercise of discretion – Where the evidence does not allow the Court to be satisfied that the appellant would face hardship from refusal to grant leave to commence property proceedings out of time – Costs certificates issued. Legislation: Family Law Act 1975 (Cth) ss 44, 75, 79
Federal Proceedings (Costs) Act 1981 (Cth)
Confiscation of Proceeds of Crime Act 1989 (NSW)
Cases cited: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; [1990] HCA 33
Dimmick & Harrison (No 3) [2023] FedCFamC1A 81
Hardwick & Hardwick (No 2) [2022] FedCFamC1A 216
Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390; [2010] HCA 32
Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34
Nelson & Nelson (1995) 184 CLR 538; [1995] HCA 25
Valder & Saklani (2021) FLC 94-042; [2021] FamCAFC 142
Welland & Hawthorn (2021) 64 Fam LR 520; [2021] FedCFamC1A 43
Number of paragraphs: 91 Date of hearing: 7 November 2023 Place: Sydney Counsel for the Appellant: Mr Lethbridge SC Solicitor for the Appellant: Branston Neville Lawyers Counsel for the Respondent: Ms Treherne Solicitor for the Respondent: Memcorp Lawyers Pty Ltd ORDERS
NAA 191 of 2023
PAC 1280 of 2019FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR KRUEGER
Appellant
AND: MS KRUEGER
Respondent
ORDER MADE BY:
CHRISTIE J
DATE OF ORDER:
21 NOVEMBER 2023
THE COURT ORDERS THAT:
1.Leave to appeal the order of a judge of the Federal Circuit and Family Court of Australia (Division 2) made 5 July 2023 is granted.
2.The appeal is allowed.
3.Order 2 of the orders of the Federal Circuit and Family Court of Australia (Division 1) made 5 July 2023 is set aside.
4.The application for leave to commence proceedings out of time is dismissed.
5.The appellant is granted a costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate stating 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 him in the appeal.
6.The Respondent is granted a costs certificate pursuant to s 6 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate stating 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 her in the appeal.
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 Krueger & Krueger has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CHRISTIE J:
This is an appeal against orders of a Judge of the Federal Circuit and Family Court of Australia (Division 2) made on 5 July 2023 which dismissed the husband’s application to commence financial proceedings out of time pursuant to s 44(3) of the Family Law Act 1975 (Cth) (“the Act”). The husband requires leave to appeal.
The primary judge also made orders dismissing the husband’s application to join his trustee in bankruptcy to the proceedings and orders in relation to filing and serving written submissions on the issue of costs.
The appellant’s Notice of Appeal indicates an intention (if leave is granted) to prosecute an appeal against all of the orders of the primary judge, however the appellant’s grounds of appeal are confined to challenge of the order of the primary judge dismissing his application to commence property proceedings out of time. Accordingly, the focus in the consideration of this appeal remains whether the primary judge was in error in refusing leave to commence property proceedings out of time.
At the hearing of the appeal, senior counsel for the husband sought leave orally to amend the grounds of appeal by the inclusion of particulars in respect of Ground 1. The respondent wife opposed leave but properly acknowledged that to the extent that the appellant may have intended to raise the particularised matter in oral submissions she could not be heard too strongly against leave. Ultimately, as discussed below, I permitted the amendment in part.
THE TRIAL
The primary judge set out a brief history of the parties’ relationship. That history is uncontroversial in this appeal and was set out as follows at [5]–[12] of the reasons for judgment:
5.As to the family history, the [appellant] is aged 37, the [respondent] is aged 34.
6.They have two children, aged 10 and 11.
7.The children are in the care and control of the wife, pursuant to parenting orders.
8.The parties married […] 2008.
9.The wife purchased the matrimonial home in about December 2008 in her sole name.
10.On or about 1 February 2018, the parties separated on a final basis, although the husband said they had separated under one roof as early as 2015.
11.On […] July 2019, a divorce order was made, so the applicant husband had one year from that date to bring proceedings.
12.He did not file for another two and a half years, on 1 December 2022.
The primary judge referred to three prominent intervening events relevant to the application for leave out of time, namely:
(1)the husband’s bankruptcy;
(2)the husband’s imprisonment; and
(3)civil court proceedings in which the husband’s brother was successful in an action against the respondent over a deed recognising building work performed by him on the parties’ former matrimonial home.
As to the bankruptcy, the husband was a bankrupt between 2013 and 2022. The husband was discharged from bankruptcy in August 2022 but, as at the time of the hearing before the primary judge, the bankruptcy had not been annulled. It was unchallenged at the original hearing that the bankruptcy was as lengthy as it was due to the husband refusing to disclose his sources of income to his trustee in bankruptcy.
As to the imprisonment, the husband was imprisoned for two periods on account of various criminal offences in October 2013 and 2014–2015.
As to the civil court proceedings, the husband gave evidence in a case brought by his brother to achieve a judgment against the wife in the Supreme Court of New South Wales (“the Supreme Court”) in relation to works undertaken by the husband’s brother on a property in the wife’s name. The civil court proceedings spanned four years and four separate judgments were given. Ultimately, the wife was ordered to pay (after sets offs for costs) $185,000 to the husband’s brother. Her legal fees in those proceedings were $433,846.
The former matrimonial home was sold. At the time of the hearing before the primary judge there was about $740,000 in a solicitor’s trust account.
THE APPEAL
Leave to Appeal
Section 28 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) imposes the requirement that an appellant seek leave to appeal an interlocutory order. This appeal against refusal to grant leave to commence proceedings out of time requires leave: Welland & Hawthorn (2021) 64 Fam LR 520 (“Welland & Hawthorn”) at [13].
Medlow & Medlow (2016) FLC 93-692 sets out at [57] the principles to be applied to an application for leave to appeal, being that leave to appeal will only be granted where:
(a)The decision of the primary judge was “attended by sufficient doubt” to warrant its reconsideration; and
(b)If leave were refused, a “substantial injustice” would result, supposing the original decision to be wrong.
Here, the merits of the appeal will first be considered and thereafter leave reconsidered.
Commencing proceedings out of time
Section 44(3) of the Act provides that, in the absence of consent, either party requires the leave of the Court to commence proceedings.
The grant of leave is an exercise of judicial discretion.
Section 44(4)(a) of the Act provides that the Court would not grant leave unless satisfied “hardship would be caused to a party to the relevant marriage or a child if leave were not granted”.
This finding of hardship is sometimes referred to as a gateway or threshold finding because unless hardship is established the discretion is not enlivened. But a finding of hardship will not necessitate a grant of leave, it will merely enliven the Court’s discretion.
The hardship that the Court considers is not hardship at large but hardship in a specific context namely – hardship occasioned by the failure to grant leave.
In order to demonstrate hardship, the appellant needed to persuade the primary judge that he had an arguable case for property adjustment such that failure to grant leave would occasion hardship.
This requires an analysis (albeit not in the fulsome manner required at a final hearing) of the claim which would be brought if leave were granted.
The husband asserts that the primary judge ought to have found that dismissal of his application under s 44(3) of the Act would constitute hardship since it would deprive him of the right to bring his property claim.
The existence of an arguable claim is required. Further, the jurisprudence has also recognised that any such claim must be proportional to the costs of pursuit of same – otherwise the alleviation of hardship is illusory.
Ground 1
Ground 1 of the Notice of Appeal asserted that the primary judge “erred in failing to grant leave to bring proceedings out of time pursuant to section 44(6) of the Family Law Act 1975 (Cth)”.
Plainly the ground identifies an incorrect subsection of the Act. This in and of itself may not be determinative if the ground were otherwise meritorious.
As senior counsel for the husband was aware, in seeking to amend the grounds, an appellant’s grounds of appeal should advance a specific error rather than state that the resulting order is wrong. The specific error which the proposed amended Ground 1 identified was “[h]is Honour misdirected himself as to the relevance and consequences of the Supreme Court proceedings brought by the husband’s brother”.
As indicated at the hearing of the appeal I granted leave to the appellant to argue Ground 1 particularised by reference to the specific error asserted above, but otherwise dismissed the oral application for amendment to the extent that it sought to add as a particular of Ground 1 matters relating to delay. Matters relating to delay could only ever have been relevant to the exercise of discretion if a finding of hardship was made and accordingly were not properly advanced as a particular of the proposed amended ground.
Ground 1 and the focus of the appellant’s oral submissions was squarely on the primary judge’s approach to the husband’s participation – as a witness – in litigation brought by his brother in the Supreme Court.
It is necessary to set out some of the uncontroversial background matters to appreciate the submissions of both the appellant and the respondent. I will do so by setting out the content of a “Joint Statement of Agreed Facts and Issues for the Purposes of Hearing on 16 June 2023” which was before the primary judge:
Agreed Facts
1.The Applicant, [Mr Krueger], and Respondent, [Ms Krueger], were married [i]n […] 2008.
2.In about December 2008, the Respondent purchased the matrimonial home at [B Street, Suburb F] (Property). The purchase price was $455,000. The sale completed in January 2009. The Respondent became (and remained until its eventual sale) the sole registered proprietor of the Property.
3.The relationship produced two children: [X] born […] 2011 (now 12) and [Y] born […] 2012 (now 10).
4.On or around 1 February 2018, the Applicant and the Respondent separated on a final basis.
5.On 17 December 2018, the Applicant commenced proceedings seeking parenting orders. The Applicant was legally represented throughout the proceedings.
6.[I]n July 2019, a divorce order (caused by the Applicant’s application for same) took effect. The Applicant was legally represented throughout the divorce proceedings.
7.On 11 February 2020, final parenting orders were made by consent as between the parties.
Applicant’s bankruptcy
8.From […] 2013 until […] 2022, the Applicant was bankrupt.
Supreme Court proceedings
9.On 13 December 2018, the Applicant’s brother, [Mr E Krueger] ([Mr E Krueger]), commenced proceedings in the Supreme Court of New South Wales seeking repayment of alleged contributions made by him to the Property. [Mr E Krueger]’s [sic] sought relief based on a Deed entered into between the Respondent and [Mr E Krueger] on or around December 2013. The Applicant was a witness [in Mr E Krueger]’s case.
10.[I]n May 2021, the Supreme Court of New South Wales handed down its decision in [Krueger] v [Krueger] […]. The Court explained its decision in [Krueger] (No 2) […]:
The position that the Court ultimately reached in the primary judgment was that, in principle, the deed should be set aside, but that such an order should only be made if [Ms Krueger] paid a reasonable amount of compensation to [Mr E Krueger].
11.The hearing then proceeded to a further trial on the quantum of the compensation which should be paid to [Mr E Krueger].
12.[I]n October 2022, the Supreme Court handed down its third decision, [Krueger] v [Krueger] (No 3) […]. The Court determined that [Ms Krueger] should pay to [Mr E Krueger] the sum of $400,000 but that she need not pay that amount until the cost issues in the proceedings were determined: [Krueger] (No 3) [...].
13.[I]n February 2023, the Supreme Court made a costs order in the Respondents favour in the gross sum of $215,000. As a result, the Respondent paid [Mr E Krueger] $185,000 upon the sale of the Property in February 2023: [Krueger] and [Krueger] (No 4) […].
Proceedings filed out of time; sale of former matrimonial home
14.On 5 December 2022, the Initiating Application seeking property settlement orders was filed by the Applicant. Pursuant to section 44(3) of the Act, the application was made more than 12 months after the divorce order took effect.
15.On 7 December 2022, the matter was listed for urgent interim hearing for determination of the Applicant’s application for urgent injunctive relief to restrain the Respondent from using the proceeds from the sale of the Property.
16.On 1 February 2023, the Court made interim orders to preserve a portion of the net proceeds of sale of the Property pending the resolution of these proceedings.
17.On 2 February 2023, the property was sold. The net proceeds were $1,380,834.13.
As already discussed, on 14 November 2013 the respondent and the appellant’s brother entered into a Deed. The Deed said:
4.In consequence of the facts in recitals A and B, the parties hereto acknowledge and agree that upon the sale of the property [Mr E Krueger] is to be repaid the amount of $700,000 plus CPI for each year or part thereof that the amount of $700,000 has been outstanding, commencing 1.1.2010, prior to any monies being released to or as directed by [Ms Krueger].
5. In the event that the sale proceeds are insufficient to fully repay [Mr E Krueger], then the amount outstanding after payment to [Mr E Krueger] will continue to be a loan owed to [Mr E Krueger] by [Ms Krueger].
6. Subject to clause 7 below, no repayments of the Principal Sum or any part thereof shall be required until the Property is sold or transferred.
7. In the event of a separation or divorce between Ms Krueger and her husband, [Mr Krueger], then the amount outstanding to [Mr E Krueger], calculated in accordance with clause 4 herein, is due and payable immediately to [Mr E Krueger], whether or not the property is sold. [Mr E Krueger] may commence recovery proceedings to recover the amount outstanding to him.
Recitals A and B were as follows:
A.[Ms Krueger] is the registered proprietor of property located at [B Street, Suburb F], in the State of New South Wales, also known as Folio Identifier […] (‘the property’).
B.[Ms Krueger] is married to [Mr E Krueger]’s brother, namely [Mr Krueger], making her [Mr E Krueger]’s sister in law.
While the proceedings by the appellant’s brother to enforce the terms of the Deed were unsuccessful, a Justice in the Supreme Court proceedings found that the nature of the agreement between the respondent and the appellant’s brother was such that it would be inappropriate for the respondent to receive the whole of the benefit of the work on the home without any corresponding payment to the appellant’s brother. This finding was an acknowledgment and determination that the respondent was required to pay monies to the appellant’s brother.
The litigation in the Supreme Court had been finalised (including as to costs) when the appellant’s application for leave to commence proceedings out of time came before the primary judge.
The appellant contends that it was the primary judge’s approach to the appellant’s participation in the Supreme Court litigation which led the primary judge to make errors of fact and draw conclusions adverse to the appellant which were unavailable on the evidence before the court.
It is an error of law to make a finding of fact where the evidence does not support the finding: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390. Accordingly, it is necessary to examine the primary judge’s approach to the appellant’s participation in the Supreme Court litigation to evaluate the merits of the complaint.
The primary judge concluded that the appellant’s action (in participating in his brother’s litigation) had the effect of reducing the pool of assets available for adjustment as between the parties. As a matter of fact, the respondent was required to pay money to the appellant’s brother. The participation of the appellant in that litigation may have assisted his brother but only because the judge found that monies were payable. The decision of the Supreme Court, in that sense, only crystallised the quantum – it did not create the liability.
The primary judge considered the actions of the appellant at [34]–[37], [40]–[45] and significantly at [55]–[61]. But it is the finding at [125] which is most significant. At [125]–[126] the primary judge said:
125. And the contributions themselves are such that all that history I related about reduction in the pool are the acts of the husband.
126.He was the one that gave evidence against the wife’s interests in the Supreme Court.
Those passages can only be read as a finding by the primary judge that the husband improperly acted to diminish the pool of assets available for distribution between the husband and the wife.
In circumstances where a judge of the Supreme Court has made findings imposing an obligation on the respondent to pay monies to the appellant’s brother and no appeal was filed, it was not open on the evidence before the primary judge to conclude, as he did, that somehow the husband’s participation in those proceedings improperly diminished the assets available for adjustment as between the husband and wife.
The primary judge’s references to the husband’s participation in the Supreme Court litigation were extensive in the reasons for judgment such that I could not be confident that the appellant received a fair hearing on the merits of his application for leave to commence proceedings out of time before the primary judge.
It follows that I see merit in Ground 1 as argued and, as a consequence, propose to grant leave to appeal and allow the appeal. It is therefore unnecessary for me to consider the further appeal grounds.
Having determined that there is merit in the appeal I conclude that the original judgment was attended by sufficient doubt and the appellant’s right to have his case determined on the merits was lost, which constitutes a “substantial injustice”. Accordingly leave will be granted to appeal and as already discussed the appeal will be allowed.
RE-EXERCISE
The Notice of Appeal filed by the appellant on 17 July 2023, sought leave to appeal and, if leave was granted, the following order:
1.That the Appellant is granted leave to commence property proceedings out of time pursuant to section 44(3) of the Family Law Act 1975.
This order sought was not amended by proposed amendment to the Amended Notice of Appeal discussed earlier in these reasons. Because the appellant sought those orders in the appeal and no party sought remitter, the interlocutory nature of the matter places me in as good a position to redetermine the matter. Accordingly, I invited submissions from both appellant’s and respondent’s counsel about any re-exercise in the event that I was minded to allow the appeal. Each, appropriately, focused on the issue of whether or not the evidence established that the appellant would suffer hardship in the event that his application for leave was dismissed.
I have read and considered the material filed by each of the appellant and the respondent, the agreed statement of facts, the case outlines, the transcript of the submissions made before the primary judge, the submissions contained in the written outlines of case and the further oral submissions made at the hearing of the appeal.
I turn then to consider the application for leave anew.
The principles which apply have been set out above at [14]–[22].
The first task is to understand the relief which is sought by the appellant if leave is granted. The appellant filed an Initiating Application on 5 December 2022. That application sought leave to commence proceedings out of time and set out the final relief the appellant sought – leaving aside the form of order – the overall intention of the appellant was plain:
1.That pursuant to section 79(4) of the Family Law Act 1975 (Cth) the Applicant receive 45% of the asset pool and the Respondent receive 55% of the asset pool.
It is important, as a consequence, to understand the nature and composition of the asset pool to appreciate the submissions of each party.
The following is drawn from the parties’ financial statements (and given the date of filing of those financial statements updated by the parties’ affidavit evidence):
Assets
Proceeds of sale of B Street, Suburb F $1,203,973
NAB bank account (W) $60
Motor vehicle 1 (W) $6,000
Household contents (W) $3,000
Clothing, accessories (W) $1,000
Company C account & entity (H) NIL
Personal bank account (H) $1,045
Furniture (J) $20,000
Total assets: $1,235,078
Liabilities
G Finance and H Finance (W) $5,000
J Finance Mastercard (W) $1,704
NAB Visa (W) $9,000
Loan from Mr D (W) $200,000
Loan from Mr E Krueger (H) $650,000
Income tax (H) $47,000
Legal fees (W) $433,846
Total liabilities: $1,346,550
Superannuation
Super Fund 1 (W) $16,195
Super Fund 2 (H) $5,000
Total superannuation: $21,195
Assets less liabilities plus super: ($90,277)
While the husband included a liability of $650,000 said to be owing to his brother in his Financial Statement it did not appear in the table in the husband’s affidavit. If it is not a liability which the husband seeks to be included in calculation of the pool then the net pool (including superannuation) would be closer to $559,723, subject to other disputes between the parties which I have identified below.
The wife said the Court would also addback or otherwise take into consideration the car and motorbike each of which she says the husband took and retained. The husband says the wife disposed of the motorbike and the car was returned. The wife gave the car and motorbike a value of $50,000 and $17,800 respectively but the evidence does not allow me to be satisfied they would ultimately be added back to the matrimonial pool.
The following may also be imposts on the pool:
(a)On 27 November 2013 an order was made in proceedings in the Federal Circuit Court of Australia (as it then was), consequent on the sequestration order, namely that the husband’s bankrupt estate pay $7,218 being the costs of the applicant for sequestration. Those costs were to be paid from the bankrupt estate. It is not plain that they have been satisfied.
(b)There were modest debts in the bankruptcy and it is not plain what the position was at discharge with the consequence that since the bankrupt estate has not been annulled property received by the husband may subject to a claim by the trustee. I can put it no higher.
(c)The husband’s evidence raises an additional issue about whether or not there may be third party claims on any funds to which he may be entitled discussed below.
The wife said the husband owed child support of $30,000 but to include that as a liability in the schedule of net assets would have the effect of making the wife share in the liability in respect of monies which are owed to her.
I accept that each party may question the liabilities (I particular the monies said to be owed to each sibling). The wife and her brother entered into a formal loan agreement. There is little evidence about the circumstances of the monies said to be advanced by the husband’s brother to the husband. It is not plain against what figure the husband’s claim of 45 per cent should be assessed. Doing the best I can the net pool is between $559,723 and ($90,277).
It is important to acknowledge at the outset that it is not the husband’s case (or claim) at its highest) which the Court is obliged to accept at the interlocutory hearing but rather the husband’s evidence, as discussed in the following authorities.
In Welland & Hawthorn, Austin, Rees and Wilson JJ said:
16.The Full Court recently had occasion to affirm that the application of s 44(6) of the Act entails satisfaction of its criteria by sequential steps (Arcand & Boen (2021) FLC 94-046). First, the applicant must demonstrate hardship and, if that hurdle is surmounted, must still persuade the exercise of discretion in his or her favour to extend time. As the Full Court said:
…
40.Supposing hardship is demonstrated, 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 extension of time was granted.
I turn then to consider the evidence which the husband filed in support of the summary assessment of his entitlements if leave were granted, consistent with the provisions of s 79(2), 79(4) and 75(2) of the Act.
The husband says the parties’ received the benefit of rent-free accommodation for the first 10 months of their relationship. I accept that this would have been of financial advantage to the parties and a contribution on behalf of the husband.
The husband says the Court would take into account a contribution by his father to the acquisition of B Street, Suburb F in the sum of $30,000. Later, inconsistently, he says his father lent the parties $45,000 to pay the deposit and, while he has made repayments, there is an unspecified amount still outstanding. Given the purchase price, the mortgage and the fact that the wife was a first home buyer (and received a first home buyer’s grant), the figure of $45,000 seems inexplicably high. Attached to the wife’s evidence is a statutory declaration by the appellant’s father indicating a $20,000 gift to the wife to enable her to purchase B Street, Suburb F. This is the best evidence available in the circumstances.
At a trial it may be that the wife submits that the acknowledgment of a gift via statutory declaration is proof that those funds ought be regarded as her contribution. The husband’s senior counsel submitted that consistent with authorities such as Dimmick & Harrison (No 3) [2023] FedCFamC1A 81 at [22] the husband would contend that notwithstanding the terms of his father’s statutory declaration the funds should be considered a contribution on his behalf. The husband’s affidavit characterises the monies as having been given to “us”, a contribution to both parties. Consistent with the principles already discussed I have assumed for the purpose of this discussion that the trial judge’s factual finding could favour the husband.
The wife obtained the loan (as the husband’s evidence is that he was unable) and being the mortgagor is itself a contribution by the wife – in this case one made over the entirety of the time the property was owned.
I then understand the relevant evidence concerning contribution to be – extensive renovation work was undertaken on B Street, Suburb F funded by the husband’s brother. In circumstances where the Supreme Court proceedings resulted in an award to the husband’s brother it is not possible for the brother’s efforts to be regarded as a contribution in these proceedings. The husband says he also provided physical labour to effect the renovations (the wife disputes this). For the purpose of considering contributions I have assumed the husband may persuade a trial judge he performed non-financial contributions of this nature during the relevant 10 month period.
B Street, Suburb F was subject to a mortgage. The wife says that between settlement of the purchase in January 2009 and 2011 she and the husband each made contributions towards the mortgage. The wife says that in 2011 she deposited $100,000 into the mortgage being $50,000 in employee entitlements received by her at the time she was made redundant and $50,000 in savings. In 2013, $23,000 and $17,800 were redrawn - the wife says to buy a car and a motorbike. The husband’s material concedes that the wife received $50,000 (described as a redundancy) but says $30,000 was applied to a motor bike which was later sold, inferentially, by the wife. The husband says the wife retained the proceeds. The husband says the car was actually purchased in the name of his brother’s company and says the wife was repaid the funds she had used to buy it.
In October 2013 the husband was arrested and subsequently incarcerated. He was released on bail in late October 2013. Following conviction he was gaoled between mid-2014 and mid-2015. There is no evidence by which a trial judge could conclude that during the period he was incarcerated he made any financial or non-financial contributions.
During the period of the husband’s incarceration the wife was solely responsible for the parties’ two children who were aged two years and 10 months respectively at the time of arrest. There is no issue that she was solely responsible for their care during the husband’s incarceration. The appellant was released from custody in mid-2015.
The wife says that the husband made no financial contribution to her between 2012 and 2015 and no contributions to the mortgage over B Street, Suburb F from 2011 until the property was sold.
The husband says he was employed by his brother full time “during [the] relationship and generated an income between $500.00 and $1,000.00 per week”. He also says this:
34.[Mr E Krueger] and I had an informal agreement whereby I was paid approximately half the market rate for works completed for his company. In exchange, he paid all the mortgage and utilities for the matrimonial home for approximately 10 years until such time as I ceased residing in the property in February 2018. [Ms Krueger] was aware of this arrangement.
And at [56]: “[a]t all times [Ms Krueger] was aware I was [involved in criminal activity] on the side to supplement our income”.
It was in the first month after the husband was arrested that the wife entered into the deed with the husband’s brother which became the subject of the first piece of litigation between the wife and the husband’s brother in the Supreme Court.
In November 2013 the husband was declared bankrupt.
The husband was required by his trustee in bankruptcy to complete a Statement of Affairs. He signed his Statement of Affairs in mid-2014. Under the heading “Declaration” the document reads:
Note: S267(2) of the Bankruptcy Act, provides that a person must not make a declaration that the person knows to be false. Penalty: imprisonment for 12 months.
I declare that the particulars set out in this statement are correct.
Question 35 in the Statement of Affairs is under the heading “Assets you contributed towards or helped purchase” and reads: “[h]ave you contributed or otherwise assisted in the purchase or improvement of any asset valued over $1000 which is held by someone ese?”. The husband answered that question “no”. By that answer he disavowed contribution to B Street, Suburb F.
While the principles in the High Court decision in Nelson & Nelson (1995) 184 CLR 538 (“Nelson”) may have application to the husband, giving evidence contrary to his previous declaration at this stage of the litigation, namely an application for leave to commence proceedings out of time, the situation is that the husband has made a declaration which is inconsistent with evidence in his sworn affidavit before this Court. Accordingly, the husband may face difficulties advancing evidence of contribution inconsistent with his previous representations and may not be permitted to do so unless he “takes all lawful steps to overcome the consequences of that conduct”: Nelson per McHugh J at [50].
On 14 September 2018 the husband took possession of the car which had been purchased from the parties’ mortgage redraw.
In about 2019 the wife vacated B Street, Suburb F and it was tenanted. The wife applied the rent to the mortgage. In addition, the wife says she applied $15,000 to renovations and repairs prior to the sale of the property.
In the post-separation period (2018–2023), the children remained primarily in the care of their mother with the consequence that she would be considered to have made greater non-financial contributions to their care.
The wife says that until July 2022 she received modest periodic child support of $52.77 per fortnight ($26.39 per week) which means she is, based on her financial statement, likely to have made a greater financial contribution to their care in this period as well. The husband says he has paid for health insurance. The husband says he increased his payments to the wife in December 2021. The parties are at issue about the extent of the husband’s contribution to educational and extra-curricular expenses. The evidence which the husband attached to his 7 June 2023 affidavit demonstrated payment of only two amounts of $500 in February 2023. If his evidence is accepted, then the period of time for which she has provided predominant financial support would be shorter.
Turning to the relevant matters under s 75(2) of the Act; it is appropriate to consider the income and earning capacity of each of the parties since that may be a matter which results in an adjustment of contribution-based entitlements. The wife says she earns no personal exertion income and receives an income-tested pension or benefit.
The wife has re-partnered. She did not provide details of her partner’s income but indicated he meets the costs of car maintenance and the children’s dance lessons.
The husband says he receives $801 per week from his business and a carers pension and carers allowance totalling $554. He says his brother pays his rent. Against that the husband says his expenses per week are $2,504. Even allowing for the payment of rent by his brother the husband’s income as set out in his financial statement falls well short of the amount necessary to pay his expenses. This anomaly is not addressed in the evidence.
Anticipated legal fees
It is necessary to have regard to the costs of pursuing the claim to assess whether the costs are proportional to the likely claim and accordingly whether the grant of leave would address any hardship which may be identified.
The wife at [53] of her affidavit sets out the following:
53.I have been informed by my solicitor and verily believe that take [sic] this matter to a final hearing, my legal costs would be in the vicinity of $132,330 made up as follows:
a.Conduct of matter up until final hearing: $75,000 + GST
b.Mediation/conciliation conference: $15,000 + GST (including counsel’s cost for preparation and attendance)
c.Two day hearing (including preparation): $13,500 + GST (solicitor costs) + $16,800 + GST (counsel costs)
The husband did not give evidence of a costs estimate in respect of the further conduct of the hearing, but assuming his costs to be in a similar amount, that would make the total costs of approximately $265,000.
It falls then to me in the re-exercise of discretion to determine whether the husband’s claim, as set out in the evidence filed, demonstrates “sufficient likelihood of success”.
In Hardwick & Hardwick (No 2) [2022] FedCFamC1A 216 at [28] their Honours said:
28.As recently noted by Austin J In Skelton and Lindop (2022) 64 Fam LR 617 […] at [16]-[21], there is differing authority as to the test to be applied in determining the prospects of success. Those tests range from the need to establish “prima facie claim” to the need to establish “a real probability of success”. We respectfully, acknowledge and adopt the reasoning of Austin J that the appropriate test to apply is whether the applicant for relief had “sufficient likelihood of success” to prove hardship.
(Emphasis in original)
The respondent submits that the husband’s evidence would not satisfy the Court that his claim was viable for a number of reasons. These include:
(a)While the bankruptcy of the appellant has ended his bankruptcy is not annulled. Accordingly, as was discussed in Valder & Saklani (2021) FLC 94-042 at 80,692 [43]:
43.…The bankrupt estate continues until it is annulled because the debts have been paid in full (s 153A of the Bankruptcy Act), by court order (s 153B of the Bankruptcy Act) or because the creditors have accepted a payment under s 73 of the Bankruptcy Act (s 74 of the Bankruptcy Act).
The evidence in this case therefore did not exclude the possibility of there being outstanding (and unenumerated) demands on any funds to which the husband may be entitled;
(b)The husband did not provide adequate documentation concerning income to his trustee in bankruptcy raising significant questions about how he would demonstrate that he had made the financial contributions he now asserts.
To those issue I would also add:
(c)The husband explicitly indicates that contributions made by him were made “[criminal activity]”. It is difficult to conceive how the husband might demonstrate those contributions. This evidence also raises a real issue about whether any funds to which the appellant may otherwise be entitled would be vulnerable to a claim under the Confiscation of Proceeds of Crime Act 1989 (NSW). I cannot make a definitive finding but will return to this later when I consider the residual discretion; and
(d)The husband explicitly indicates that his brother diverted wages, which would otherwise have been payable to the husband, to the mortgage over B Street, Suburb F throughout the period of the husband’s bankruptcy. This evidence would appear to indicate on its face that whatever information was provided to the trustee in bankruptcy concerning income may not have been a true representation of the husband’s income; and
(e)Similar issues arise in respect of the representations of the husband discussed at [70].
Conclusions
The husband may, on the basis of the above evidence, have an arguable case for recognition of financial and non-financial contributions made by him but its strength is not plain given the identified evidentiary difficulties. Further, the size of the pool, the childcare arrangements, the child support history and arrears and the wife’s income all speak to the wife having an entitlement to recognition of matters pursuant to s 75(2) of the Act. Finally, the costs of the litigation are such that the Court could not be satisfied that hardship would be caused to the husband by failure to pursue the claim with its attendant costs.
Because I have not determined that the appellant would experience hardship from refusal to grant leave, other matters which may be relevant to the exercise of discretion do not arise since the finding of hardship functions as a preliminary or gateway step in the process.
As indicated, I have found that hardship would not be caused to a party to the relevant marriage or a child if leave were not granted. However, even if I had been persuaded that the evidence supported a conclusion that hardship would be caused to the appellant if leave were not granted, I would nonetheless have exercised the discretion created by s 44(3) of the Act because of the matters set out at [84]-[85].
COSTS
The respondent sought her costs of appeal in the event that the appeal was dismissed.
The respondent filed an itemised schedule of costs as was directed. That schedule did not comply with the Federal Circuit and Family Court of Australia (Family Law) Rules2021 (Cth).
I have allowed the appeal. In the circumstances discussed above I consider it is appropriate that each party have a benefit of a certificate under the Federal Proceedings (Costs) Act 1981 (Cth).
I certify that the preceding ninety (91) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Christie. Associate:
Dated: 21 November 2023
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