Lambre and Keenan
[2010] FMCAfam 578
•11 June 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LAMBRE & KEENAN | [2010] FMCAfam 578 |
| FAMILY LAW – Property – section 44(3) application – leave granted – section 79 adjustment made. |
| Family Law Act 1975 (Cth), ss.44(3), 44(4), 79, 75(2) |
| Althaus & Althaus (1982) FLC 91-233 Hedley & Hedley (2009) FLC 93-413 McDonald & McDonald (1977) FLC 90-317 Whitford & Whitford (1979) FLC 90-612 |
| Applicant: | MS LAMBRE |
| Respondent: | MR KEENAN |
| File Number: | CAC 447 of 2008 |
| Judgment of: | Brewster FM |
| Hearing date: | 13 March 2009 |
| Date of Last Submission: | 11 June 2009 |
| Delivered at: | Canberra |
| Delivered on: | 11 June 2010 |
REPRESENTATION
| Counsel for the Applicant: | Ms Haughton |
| Solicitors for the Applicant: | Ray Swift Moutrage & Associates |
| Counsel for the Respondent: | Self represented |
ORDERS
That within 60 days the wife pay the husband the sum of $105,225.
That upon payment of this amount the husband transfer to the wife the whole of his interest in the property situated at Property G (“the home”).
That upon the transfer the wife cause the husband to be released from any liability under the mortgage on the home.
That if the wife is unable to or unwilling to pay the amount referred to in order (1) the parties take all steps to sell the home and to divide the net proceeds between them in the proportions 65.5% to the wife and the balance to the husband.
That as against the other each party be entitled to retain the chattels in that party’s possession and choses-in-action in that party’ name.
IT IS NOTED that publication of this judgment under the pseudonym Lambre & Keenan is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CANBERRA |
CAC 447 of 2008
| MS LAMBRE |
Applicant
And
| MR KEENAN |
Respondent
REASONS FOR JUDGMENT
Introduction
I commence by apologising to the parties for the delay in producing this judgment.
This matter involves an application by the wife for leave under section 44(3) of the Family Law Act to institute proceedings under section 79 of the Act out of time and, if leave were granted, for an order to be made in her favour under section 79.
Section 44 (3) provides that proceeding under section 79 may not be instituted without leave of the court if more than 12 months have elapsed since the parties were divorced. Section 44(4) provides that leave shall not be granted unless a refusal to do so would cause hardship. Hardship has been defined by the Full Court of the Family Court as being equivalent to substantial detriment.
After the hearing in this matter the Full Court delivered judgment in an appeal from a decision of mine in Hedley & Hedley (2009) FLC 93-413. In that case I had refused the wife leave under section 44(3). The Court decided that, for reasons I need not explain, the wife did not require leave and therefore allowed the appeal. Having done so however, two of the members of the Full Court, Boland and Cronin JJ discussed the procedure I had adopted in, effectively, hearing the section 44(3) application together with the issue under section 79. They held that I was in error to have done so. In the present case, unaware of the views that would subsequently be expressed by the Full Court, I heard both the section 44(3) application and section 79 application together. Had I refused leave under section 44(3) that would have been the end of the matter. As it was however, I have granted leave and proceeded to deal with the section 79 application.
Boland and Cronin JJ would regard such a course as inappropriate. The third member of the court, Finn J, found it unnecessary to decide this issue but expressed the tentative view that perhaps the course I adopted was an appropriate way of dealing with such matters in a high volume court such as the Federal Magistrates Court.
When I first read the majority judgments I considered that the members of that majority were wrong to regard my approach as constituting appealable error. The cases on which they relied were cases where appeals had been instituted claiming that the trial judges’ refusal to permit cross-examination was an appealable error. The Full Court in each case held that it was not and that section 44(3) proceedings may be conducted in a summary manner without oral evidence. I considered that it is one thing to hold that refusing to allow cross examination was not an error but another to hold that permitting cross-examination was an error.
On closer consideration however I realised that I had misunderstood the reasons of the majority and had not paid enough attention to the cases upon which they relied. I had always assumed that it was the end result of a case that determined whether or not a refusal to grant leave would cause hardship. If making an order under section 79 would give the applicant a substantial benefit then refusing leave would involve a substantial detriment. In some cases it is clear at the outset that the outcome, were leave granted, would give the applicant a substantial benefit. In some cases it is obvious that it would not. In such cases in the past I have dealt with the leave application as a discrete issue. But in others, of which Hedley was one, it is necessary to have a full hearing to determine what the outcome would be.
However I was wrong. It is not depriving a litigant of the fruits of a section 79 adjustment that constitutes hardship but depriving him or her of the chance of obtaining those fruits.
The exercise reminds me of Erwin Schrodinger’s famous thought experiment designed to show the oddities involved in quantum mechanics. In his scenario a cat is placed in a sealed box with a phial of poison gas. In another part of the box is a very sensitive Geiger counter and a single atom. If the atom decays it releases radioactivity and the Geiger counter is activated. This causes the phial to break. The cat dies. But the atom may not decay in which case the cat will live. As we cannot observe the cat we do not know its fate. But in terms of quantum theory it is neither dead nor alive but simultaneously both dead and alive. When the box is opened the quantum effect ceases and the cat takes on a more conventional existence (or non existence if it is dead). It is not necessary to explain this which is just as well as I would be merely parroting what Schrodinger and others have written without understanding it.
Transposing this to a section 44(3) application suppose the applicant wants the cat. Suppose that if she got the cat it would be a substantial benefit to her. Ergo to deprive her of it involves substantial detriment. The mistake I made in Hedley was to open the box. Having done so I formed the opinion that the cat was dead. I concluded that the applicant would suffer no substantial detriment if leave were not granted, and refused leave. But this was an error. I should have addressed the question of whether or not, without knowing if the cat were dead or alive, depriving her of the chance of getting the cat alive involved her suffering substantial detriment.
It is not entirely clear from the authorities referred to by the majority in Hedley the extent to which an applicant must establish that the cat may be alive. Various Full Courts have used different expressions. In McDonald & McDonald (1977) FLC 90-317 the court referred to “a prima facie case which is substantial.” In Althaus & Althaus (1982) FLC 91-233 Evatt CJ spoke of the applicant needing to demonstrate “a reasonable claim to be heard”. In Whitford & Whitford (1979) FLC 90-612 reference was made to “a probability of success”. In Hedley however Cronin J at paragraph 220 said that, subject to certain matters being established, even an applicant with a weak case has a right to be heard.
I am not at all convinced that this interpretation of section 44(3) is correct. From my reading the legislation does not compel this construction. In my opinion it is the reverse but I will not discuss this. I have other problems with it which I will not discuss either. Nor am I happy with its practical result. It necessitates in every case the court conducting two hearings. In Hedley I imagine, had I approached it in the correct way, I would have granted the wife leave at the first hearing and then, at the subsequent hearing, considered and refused her section 79 application. I query whether this is in the interests of the efficient disposition of the work of the court or in the interests of its litigants.
However none of these matters are relevant. The law is as stated by the Full Court. It is not what I think it is. What then am I to do in the present case? Without realising that it was an error, I opened the box.
I am of the opinion that in the present case my error did no harm. In Hedley I refused leave. In this case I have granted it. The end result in this case would have been the same no matter what approach I took. As a result I will not go through what would now be an absolutely artificial exercise of deciding, when dealing with the leave issue, what the wife’s prospects in the end result would be. Having opened the box I cannot see the point of closing it and pretending that I do not know if the cat is dead or alive.
I turn to the facts of the case.
The applicant wife is 51 years of age and the husband 48. They were both born in China. They met in 1989 and were married [in] 1990. They separated in 1997 (according to the husband) or 1998 (according to the wife) and were divorced on 20 November 1999. It is not necessary to make a finding as to the date of separation. This application was filed on 17 March 2008, more than seven years after the limitation period provided for in section 44(3).
There are no children of the marriage.
The parties’ applications
The wife seeks an order that the husband transfer to her his interest in the former matrimonial home situated at Property G (which in this judgment I will call “the home”) and that she pay him $30,000. The husband seeks that the wife’s application be dismissed. The home is in joint names so the result of this would be that the parties’ legal and equitable interests would apply. There is no basis for finding that the parties’ equitable interests differ from their legal interests, ie equal. Nor in my opinion is there a basis for taking accounts and ordering on this basis that the wife is entitled to any payment before dividing the property. It is not necessary for me to undertake what would be a lengthy exercise of explaining to the husband, who does not have a lawyer, what is meant by equitable interests or the taking of accounts. The result would be that I would make an order under section 78 of the Act to give effect to this. The result would be an equal division of the equity in the home.
Discussion
I shall first proceed to consider what order I would make were there no section 44(3) issue involved. I appreciate that this is an erroneous approach but I might as well make the best of a bad thing. As I have indicated to do otherwise would be artificial. I will then make a determination as to whether the wife’s losing the right to have an alteration to property interests under section 79 would constitute hardship. I shall then consider all the facts of the case to determine if, in the exercise of my discretion, I should grant her leave under section 44(3). If I were to grant her leave I would make an order under section 79. As can be seen I have granted her leave and made such an order.
The Full Court of the Family Court of Australia has indicated that in proceedings under section 79 a four stage process should be undertaken. The first stage involves making findings as to the pool of property. The second stage involves a consideration of contributions made by or on behalf of each of the parties. If appropriate an alteration of property interests may be made on this basis. The third stage, for the purposes of this case, involves a consideration of the matters set out in section 75(2) of the Act as may be relevant. Again, if appropriate, an alteration of property interests may be made on this basis. The final stage involves something of a “wood from the trees” exercise in that one looks at the overall result obtained from the second and third stages to determine if, overall, that result is just and equitable.
The pool
The only substantial asset acquired during the marriage is the home which the parties agree is valued at $320,000. It is subject to a mortgage of $15,000 leaving an equity of $305,000.
The husband has a house in [A] which was purchased post separation. It is valued at between $230,000 and $240,000. It is not necessary to make a finding as to its precise value. It is subject to a mortgage of $160,000.
The husband would have me find that the wife has an interest in a property in Vietnam. He says that at the end of 2001 he met the wife in Vietnam and gave her an amount of about $53,000 to buy a house in Saigon for investment purposes. He says that the property was purchased in the wife’s cousin’s name because under Vietnamese law non-nationals are not permitted to own property. His case, as I understand it, is that the wife’s cousin holds the property on trust for the wife or that in some other way the wife has a right to the property or the proceeds of any sale. If I accepted the husband’s evidence it would raise interesting questions. First there is no valuation of the property. Secondly there is no evidence as to the Vietnamese law in this area (which is treated as an issue of fact that must be proved). I have no idea if, were the facts as deposed to by the husband, the wife would have any rights against her cousin. But I need not discuss this. The wife denies that this transaction ever occurred and says that there is no property in Vietnam. I accept her evidence.
The husband claims to be indebted to a lady by the name of Ms T. He says that he borrowed $80,000 from this lady prior to separation. The wife says she knows nothing of this debt. I accept her evidence. Accepting that the husband borrowed money from Ms T I am not satisfied that she will ever require this money to be re-paid. Only one amount has ever been paid by way of reduction of the debt. But for his acknowledging the debt in his affidavit it would be statute barred. I propose to ignore it.
Contributions
The husband maintains that he contributed the overwhelming majority of funds to the marriage. He says that he worked as an [omitted] and also had a [omitted] business from 1991 to 1994. He says that the wife was never in paid employment but was reliant on social security. The wife for her part does not deny that she was never in paid employment but does say that she worked in the [omitted business]. I accept this evidence. Off-setting the financial contributions of the husband to a degree is the fact that in 1994, from the proceeds of sale of the [business], he sent an amount of $40,010 to his family. He says that this was to repay a loan made before the parties relationship commenced to assist him with his studies in Australia. The wife’s response was that the $40,010 was from joint savings and not from the sale of the [business]. She says that this was not sent to China to repay a loan but to assist his family in buying a property. She says that there was a further amount sent to China of $45,000 which came from the proceeds of sale of the [business].
The evidence in this respect is unsatisfactory. The wife annexes to an affidavit a photocopy of a page from the parties’ passbook showing that as at 28 July 1994 that account was in credit in the sum of $48,254.23 and that an amount of $40,010 was transmitted overseas on 29 July. There is no evidence as to the $45,000 the wife alleges was also sent to China nor does the passbook indicate that the $48,254.23 was from savings as opposed to the proceeds of sale of the [business]. In the end result I am only prepared to find that the husband sent $40,010 overseas.
In July 1993 the wife suffered injuries to her back and legs in a motor vehicle accident. She was a passenger in a car being driven by the husband. She claimed damages with respect to her injuries and this was settled for a gross amount of $75,000. After deductions of legal fees and other expenses she received a net amount of $52,772.12. She endorsed the cheque for this amount to the husband. She says, and I accept her evidence, that he paid $16,000 to his father in relation to medical expenses for his father, paid $10,000 to creditors of the [business] and dissipated the balance in gambling.
Technically only the $10,000 of these monies, being the monies used to pay [business] debts, could be categorised as a contribution by the wife under paragraphs (a), (b) and (c) of sub-section 79(4). That is because the balance was not used towards the property of the parties or to the benefit of the family. However I propose to take this matter into account under section 75(2)(o). By this I mean that the fact that only $10,000 of her damages monies were applied to the benefit of the family can be laid at the door of the husband.
The wife says that she was the party primarily responsible for cooking, cleaning, washing, ironing, gardening and shopping. She says that she had no assistance from the husband in this respect. I accept her evidence.
Since separation the wife has been solely responsible for paying mortgage instalments, rates, insurance and other outgoings on the home. She has also maintained it. However I have regard to the fact that she has had the benefit of occupying the home and I do not take this into account.
Overall I find that contributions favour the wife. I accept that the husband earned more than the wife but off-setting this is the fact that he sent the $40,010 to his family together with $16,000 from the wife’s damages monies and dissipated all but $10,000 of the balance of those monies gambling. As I have indicated I am satisfied that she made the bulk of non-financial contributions.
In making a contribution based adjustment I propose to adopt an asset by asset approach and ignore the husband’s [A] property. The wife made no contribution to this property.
In considering what contribution bases adjustment should be made it is necessary to appreciate what this means in dollar terms. The pool is about $300,000. A 10% adjustment is therefore about $30,000. But this is misleading. Making a 10% adjustment in favour of a party equates to a 20% difference in their entitlements. This is about $60,000.
I accept that the husband would have contributed more income (that is periodic income) during the marriage than would the wife, even allocating to her a notional income referable to her working in the [business]. However as I have indicated some $40,000 was sent by him to China and it is impossible to know where the balance would lie. The only clear finding I can make is that the wife contributed a lump sum of $52,772.12. This was made a long time ago. But theoretically had she not given it to the husband for him to use (mostly) for his own purposes, and had she instead invested it she would now have a large sum of money, much larger than the amount she will receive consequent on the adjustment I have made. In most cases one regards the significance of a lump sum contribution as being eroded by the passage of time. However in the particular circumstances of this case I propose to apply only a modest discount. I also take into account her non financial contributions during the relationship. I make an 8% contribution based division in favour of the wife.
Section 75(2) factors
The wife is not in employment and reliant on social security. The husband is a qualified [occupation omitted] although it is impossible to determine definitively what his earning capacity in this field is. I am satisfied however that there is a disparity in the parties’ income earning capacities such as to favour an adjustment in her favour under section 75(2).
I also have regard to the fact that the husband has a property in [A] with an equity of between $70,000 and $80,000.
However when making an adjustment under section 75(2) I have regard to the fact that this was a comparatively short marriage of eight years duration. This is shorter than the period between the parties’ separation and the wife’s instituting these proceedings.
I make a 7.5% adjustment in favour of the wife under section 75(2).
Conclusion and overview
The end result is that under a section 79 adjustment the wife would receive 65.5% of the equity in the home. In dollar terms this gives her $199,775 and the husband $105,225 and she can retain the home by paying the husband this amount.
I am satisfied that this is just and equitable.
The wife’s section 44(3) application
As I have indicated if I refused leave the wife would have to pay the husband one half of the equity in the home to retain it. This would be an amount of $152,500. She would therefore lose an amount of $47,275 if leave were refused. As I have indicated the term “hardship” has been judicially defined as “substantial detriment”. I am satisfied that, given the fact that the wife is dependant on social security, refusing her leave would cause her hardship. She therefore surmounts the only mandatory bar imposed by the legislation. However this is not the end of the matter. I still must determine if, in the exercise of my discretion, whether I should grant leave.
This is not a straightforward exercise. The most significant factor militating against the grant of leave is the extent of the delay and the failure of the wife to explain that delay. In her affidavit material she says that she did not institute proceedings because she did not know where the husband was. However I do not accept that this is the real reason for her delay. After the parties separated the husband returned to China. I accept that it would probably have been impossible to have served the husband with an application whilst he was in China. However she knew where his family lived and I have little doubt that an application for substituted service would have been granted on condition that the documents were sent to his family with a letter in the appropriate language requesting that they be sent to the husband. He later returned to Australia and saw the wife on occasions. The wife was aware that he enrolled at [university omitted]. Again an application for substituted service would have been granted and in all probability her application would have come to the attention of the husband. It is not just the twelve months from the divorce that must be explained. It is the whole period of the delay. I find that there is no satisfactory explanation for the delay.
Had the wife’s delay significantly prejudiced the husband in that it caused him to make financial decisions in reliance on the assumption that he a half owner of the home I would have exercised my discretion in his favour. However this is not the case.
In previous cases I had opined that the appropriate approach is to compare the extent of the hardship that would be suffered by a refusal of leave with the cogency of the matters that would cause me to exercise my discretion in favour of the husband. As I have indicated the extent of the hardship is sometimes obvious on the uncontroverted facts. But, as I have also indicated, in some case this is not the case. The majority in Hedley require me to, in the words of St Paul, “look through a glass darkly” and on this basis to assess whether or not the deprivation of the chance of obtaining a substantial benefit justifies, after considering all the discretionary issues, the granting of leave. But I have not done so. I have looked at the end result and seen it (from my perspective) “face to face”. But, as I have indicted, it would be artificial to pretend that I had not done so.
I find that the magnitude of the loss the wife would suffer is such that I should exercise my discretion in her favour and I do so.
Conclusion
In the result the order will be that the wife pay the husband the sum of $105,225 and that he transfer his interest in the home to her. I have made provision for a sale if she is unable to do this.
I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of Brewster FM
Date: 11 June 2010
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