Marben and Marben

[2009] FamCA 942

FAMILY COURT OF AUSTRALIA

MARBEN & MARBEN [2009] FamCA 942

FAMILY LAW – PRACTICE AND PROCEDURE – Leave to commence proceedings out of time

APPLICANT: Ms Marben

RESPONDENT: Mr Marben

FILE NUMBER: SYC 2069 of 2009

DATE DELIVERED: 2 October 2009

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Cohen J

HEARING DATE: 25 August 2009

REPRESENTATION

SOLICITOR FOR THE APPLICANT: REDMOND HALE SIMPSON

SOLICITOR FOR THE RESPONDENT: ELLIOT TUTHILL SOLICITORS

Orders

1. That the wife is hereby granted leave subject to order 2. pursuant to s.44(3) of the Family Law Act 1975 (Cth), to commence proceedings against the husband pursuant to s.79 of the Act more than one year after the parties’ divorce.

2. That such leave is to be exercised by filing her application for final property orders against the husband within one month from the date of these orders.

3. That costs are reserved.

IT IS NOTED that publication of this judgment under the pseudonym Marben & Marben is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 2069 of 2009

MS MARBEN

Applicant

And

MR MARBEN

Respondent

REASONS FOR JUDGMENT

1. The matter before me is an application of the wife for leave to institute s.79 FamilyLaw Act proceedings although the usual limitation period of 12 months since the parties have divorced has elapsed. The parties were married in May 1988 in Australia and were divorced on 2 April 2003, also in Australia. Pursuant to s.44 (4) of the Act, such leave should not be granted unless the Court is satisfied that a party to the marriage or a child, not necessarily of the marriage, will suffer hardship if leave is not granted. The cases establish that whether or not the applicant has established hardship to herself or one or both of the parties’ children is to be regarded as a preliminary issue. If hardship is not established, the application should be dismissed. If it is established, this does not necessarily determine the matter. The grant of leave is discretionary, so other factors need to be considered such as the hardship to the other party caused by the commencement of proceedings out of time, the reasons for the delay and the availability of other remedies. It is also established that, to count the hardship as within the meaning of that term in s44 (4), there needs to be a prima facie finding that there will be an appreciable detriment to the person who is said to suffer the hardship. A small potential loss is not enough.

2. In the matter before me, Mr Foster, counsel who appeared for the husband, very properly made some important concessions.  One is that it is not contested that the wife could establish an adequate explanation and valid reason which would excuse the delay.  I probably would have found this to be the case in any event, but I need not now give reasons for such a finding.

3. It is the husband’s case on the threshold issue that if leave were to be granted the wife would receive about the same, a little more or a little less, possibly significantly less, after her own legal costs are counted for pursuant to s79 than she already has. The husband further argues that if the wife is found to have suffered hardship, the hardship his client will suffer if leave is granted outweighs the hardship the wife and his children will suffer. He very properly conceded that some of the hardship his client might be said to suffer is more illusory than real because, pursuant to s.79 itself, the hardship he will suffer would be taken into account. He submitted that nevertheless, the situation the husband is in now is to some extent irretrievable and that he allowed it to occur in reliance on the wife’s acquiescence in failing to bring a property claim in time. It is also argued on behalf of the husband that the wife may have a right to bring proceedings in Equity which would redress any hardship she might otherwise suffer if deprived of a right under s.79.

4. Any such right, which would be a right in property; a chose in action, must be over property which would be regarded as part of the pool for division between the parties in any s.79 proceedings and would merge and disappear in s.79 proceedings. There would be no point allowing that right to be litigated in the Family Court of Australia as an ancillary matter in the Court’s extended jurisdiction because the division of the pool is made under s.79 and s.75 (2) virtually without regard to the parties’ respective property rights.

5. The authorities on the issue of the preliminary aspect of hardship are to the effect that it is sufficient to the applicant to show, prima face, that she will have lost a claim of some consequence if leave is not granted; that is, that she will be significantly worse off. That is the essence of the wife’s case. Her approach and that of the husband, are such that the initial consideration should really consist of determining what assets each party has and what the result of s.79 proceeds is likely to be on the prima face evidence of each party.

6. The wife does not know the financial situation the husband is in. She seems to suspect he has not been fully candid with the Court even if his statement of financial circumstances is true. These statements do no necessarily tell the full story. Here, the reality is that the wife does not allege the husband has ever been untrustworthy in the past and, if he has been, she will probably be in no position to establish this because he lives in South Africa and, during the parties’ cohabitation, always lived there. The funds available to her are not likely to permit her to engage in the forensic exercises which would be needed to show he has not disclosed his true situation if it is the case. At this stage, I must rely on the husband’s affidavit evidence and the statement of financial circumstances to determine the likely overall assets of the parties which will be available for division under s.79, provided there is nothing in it to lead the Court to be dissatisfied about the husband’s level of disclosure.

7. Before dealing with the respective assets, and also debts and contributions of the parties for the purpose of determining whether the wife is likely to do significantly better by being able to take s.79 action, it is it is appropriate to relate the salient facts of the case which are known to me.

8. The wife is Australian.  The husband is South African.  The parties commenced living together in about 1985 in South Africa and continued to so until August 1995 when the wife came to Australia with the children.  While living together the husband, who is qualified in a profession, conducted his own business and had an interest in others.  At about the time of separation he sold his business and interests and he received 750,000 rand or $A150,000.00. This left him with no liabilities.  He says that in the next years he was largely unemployed and he used the assets he had for living expenses for himself and the wife and for travel between Australia and South Africa so he could see the children and attempt reconciliation with the wife.  The first home had been purchased during the marriage for the equivalent of about $50,000.00 of which $45,000.00 was borrowed.  This was sold, giving them the equivalent of $30,000.00 clear. A home was bought for what was, in Australian currency, about $110,000.00 after borrowing the rand equivalent of about $98,000.00.  When this was then sold in 1995, it raised $160,000.00.

9. While the parties were living together in South Africa they had 2 children, one was born in August 1989 and the other in June 1993.  The wife had usually worked until the birth of the second child, most commonly in businesses run by the husband. She may not have worked fulltime for much of this employment. In 1994 she commenced working full time as a travel agent.  The wife used her income for the family’s day-to-day needs.  The parties had no joint accounts and the husband did not inform the wife of his financial affairs.  He paid all the bills and met all the expenses of the family other than the day-to-day needs which the wife attended to.  The husband worked long hours and the parties lived at a good standard.  The inference from the husband’s working hours is that the wife and maids provided most of the child care and homemaking.  The wife had no significant assets at the commencement of cohabitation and was in no different position when she left for Australia.

10. When the wife and children came to Australia the husband offered rental accommodation for them after they had lived with the wife’s parent’s for about six months. This home was retained for about five years.  The husband mainly lived in South Africa.  He spent about $109,200.00 in rent for the wife and children over the five years and says he had spent all his assets by 1999 in maintaining himself, the wife and children and in travel to see the children and in his attempts of reconciliation.

11. The wife had part time employment on her return to Australia. The husband was providing her and the children with financial support in addition to the rent he was paying. 

12. In 2000, because the wife was becoming concerned about her security, the husband and wife agreed that the husband should buy a house for the wife and children to live in.  The wife understood this house was to be put in the names of the children and that she would be given the right to occupy it, subject to certain conditions.  The house was purchased in 2000 for $458,500.00. The wife and children have lived in it since its purchase.

13. The initial capital of the trust was, in a $116,000.00 part, supplied by the husband and, in about a $298,000.00 part, borrowed, making the total of $414,000.00. This was used to purchase the home in C. The lender had a mortgage over the property for the whole of its loan.  Settlement of the purchase, which was in the name of the husband as trustee, was to take place on 4 October 2000.

14. The deed purports to be between the wife and the husband and to be executed by the husband as trustee of the Marben Family Trust. It contains recitals to the effect that the property was being purchased to allow the beneficiary children to live in it and to provide “a home for” the wife subject to the terms and conditions in the operative part of the deed. Such recitals can act as an estoppel or, more importantly, as a covenant between the parties to the deed which is enforceable by one party.  

15. The deed itself purports to give the wife the right to reside in the home with the children, subject to the conditions the husband and wife had agreed on. Importantly, its terms gave the wife a caveatable interest in the property. Such an interest is an interest in the land as occupier until one of the conditions for determination of that interest manifests itself. Independently, the deed provides for rent to be paid but the relevant provision only requires rent to be paid if there is agreement on the amount.  In the absence of agreement, the right to occupy would continue, but no rent would be payable.

16. The deed would, because it creates a caveatable interest, give the wife the right to occupy the property until one of the conditions to terminate the right arises. As a proprietorial right it would ordinarily continue despite sale of the land provided to purchase had notice. The fact that the trust itself could be terminated at will by the husband would not undermine the right of occupation. 

17. At or a little after purchase, the husband’s solicitors contacted the wife and must have requested that she execute a deed which she must have believed entrenched her rights.  The deed is dated 20 September 2000. The copy in evidence is signed by the husband but not wife.  It is annexed to her affidavit and, in all probability, was given to her by the husband or his solicitors. It could have been executed by her at any time, but there is no evidence that she ever executed it. 

18. The house has now been sold with the wife’s consent. Although she could have signed the deed at any time until the land was sold and it would have been enforceable to give an interest in the land, the sale leaves a question about whether the wife now has rights under it in view of never having signed it, if that is the case, and acquiescing in the sale. I have not been told that she has signed it. The wife’s evidence does not indicate whether she has or has not executed it. The husband’s evidence seems to assume she has, but does not say so.  He says “I established a trust and entered into a deed with” the wife. If it has not been executed by the wife before the sale, she is left it in the position of one who has, until sale, had the benefit of being able to specifically enforce it although it has was not signed, but has now lost that right.  The husband might have been able, in Equity, to enforce the terms of the deed before sale as against the wife although she did not sign it, but there is real doubt that the wife, having chosen not to sign it, could rely on Equity to enforce the deed against the husband after sale by replacing enforcement with equitable damages. Her failure to give evidence raises Jones v Dunkel (1959) 101 CLR 298 which indicates that any evidence she might have given would not have assisted her case. It is probable that she never signed the deed.

19. The arrangement the wife made with the husband would appear to a relatively naïve non-lawyer to meet the terms of the arrangement the wife had with the husband for it to provide her and the children with accommodation at no cost to them until she remarried, entered into a de facto marriage or until the youngest child turned 25 years, assuming he did not die before then. She actually chose the property to be purchased.  

20. At the same time as the wife received the deed, she was also given a copy of a letter from the husband’s solicitors to the husband which informs the husband of the effect of this deed as a well as a deed of trust which created the Marben Family Trust.  There is no suggestion that the wife was ever advised or told that she should have sought legal advice about her rights in relation to this matter and she simply failed to do so at the time she received it..

21. What seems to have happened, although I cannot be sure because I have not been supplied with the deed which creates the Marben Family Trust, is that such a trust was created in August 2000.  It is probably an unexceptional discretionary trust which makes the parties’ children the principal beneficiaries and provides for others to benefit from it.  The trustee has always been the husband. He could, under the trust deed, terminate the trust at will after distributing its assets, both capital and income, to the chosen category of beneficiaries. Had she obtained advice on a more secure arrangement which would prevent the trust from being wound up and which would have ensured she signed the deed and placed a caveat on the title would probably have been created.

22. The failure of husband or his solicitors to warn the wife to get legal advice and the provision to her of the deed and the letter which explains both the deed she was supposed to benefit from and the trust deed or declaration could be argued to have contributed to the wife’s failure to protect her rights. One must ask why the letter was given to the wife. It could be that it was part of an attempt by the husband to put himself in a position where he could later that claim the wife hade been fully warned of the terms and the limitations of the arrangement she had entered into, while using the letter and the deed to lull her into believing she had obtained the protection she felt entitled to and thereby was not entitled to move under s.79 if she later decided to bring an action for property settlement. Such an argument could give her a right to damages from the husband.

23. I have referred to possible arguments on the wife’s remaining rights in Equity because I must compare these to her prospective rights under s.79 of the Family Law Act to determine whether she might have anything to gain by commencing s.79 proceedings.The answer to me is quite simple and plain. Her prospects in Equity are quite uncertain because by the time the deed itself became ineffective she had not signed it, because she did not protect herself by placing a caveat on the title, because she acquiesced in the sale of the home and because the right of action she has in Equity may be against the trust rather than the husband personally.

24. The uncertainty of her position is to be contrasted with her position under s.79. Under the Family Law Act she will have the right to share in the husband’s assets in accordance with her contribution to them, his contribution to her assets and their respective needs. There is no doubt about her rights if she is given leave. Left to her other legal remedies, there is considerable doubt about her rights or, more specifically, her prospects of success.

25. The deed at best, in Equity, gives the wife the right to have another lease provided for herself and the children now that the home has been sold or damages for loss of that lease.  This right, at best to her, will expire when the younger child reaches 25 years; that is, in June 2018. Given the prospects such as death, marriage or a defacto marriage, it is probably reasonable to regard this right as likely to be held to continue for eight years from now.  The rent the husband pays for the current accommodation for the wife and children is $625.00 per week.  At 2%, the present value of $625.00 per week for 8 years is about $240,000.00. At best, in Equity, the wife would receive that sum from the husband less the difference between her legal costs and those recovered from the husband or a lease of that value, but realistically her rights in Equity are worth much less because of the high probability that any action she might take will fail. 

26. The husband says his net assets are worth about $626,000.00. The wife says hers amount to about $63,800.00 net including about $92,000.00, being the value of her superannuation. The $63,800.00 is calculated on the basis that her household contents are worth $25,000.00 rather than $138,000.00, the value listed in her financial statement. I was informed during the hearing by counsel for the wife, and it was not challenged, that in the financial statement the wife had estimated the value her household contents on their new replacement value rather than their actual value. Thus there is, at least, approximately $690,000.00 to be divided between the parties in circumstances where the husband has a second family; a wife earning $770.00 net per week and an eleven year old daughter. 

27. The husband’s wife’s financial situation has not been disclosed by the husband to the Court. It may be that what he has disclosed about his economic circumstances is incomplete. His main disclosed assets are his home in South Africa in which he claims to have $23,000.00 equity and the fund from the sale of the C home. It is curious that he regards this fund as his own when he held the home as trustee for the children. He may have lent the $116,000.00 to the trust. His income is $1275 per week. $75 comes from investments of what must be the trust money from the sale of the C house and $920.00 clear of tax, he claims, comes from his business by way of wages. One must not overlook what appears to be a great difference between the cost of living in South Africa and Sydney. The husband and his wife’s income of about the equivalent of $2000.00 per week is likely to be very substantial in South Africa if the other financial figures from his life there are a guide, and they probably are.    

28. The husband’s business is uncertain.   He gives very few details and the wife knows few. The wife claims he is employed in a profession and/or has a manufacturing business.  All the husband says is that he is employed in his own unincorporated business which he says is worth $30,000.00.  One cannot know how this value is arrived at or how accurate the valuation is. It could be the undistributed profit from recent activity, it could be its value based on its profitability.  One cannot know how he has chosen to structure his business and whether or not his holding is merely a service company or the whole business.  It is possible that other parts of the business structure in which he has no direct and recorded interest are owned by others on his behalf or to his perceived advantage.  The profits of the whole of the business might be channelled in a manner which benefits him indirectly although he has no formal interests in these parts.  The failure of the husband to provide sufficient details to clarify or reveal the actual situation to the extent that I might be able to be more confident that I understand it, raises significant suspicion, especially in light of the wife’s claim that he is also working in a profession.

1. The wife’s situation is that she has a job which she has held for more than 10 years for which she earns $1500.00 per week gross and receives net $210.00 per week from an investment property.  Her after tax income is $1390 per week. Her investment property is said to be worth about $150,000.00, but the mortgage secured over it is for $205,000.00.

2. The husband argues that on the end of the relationship between himself and the wife, he spent all his funds on transport to and from Australia and on spousal and child maintenance and that all his current assets are from efforts he made thereafter. Notwithstanding this, it is the assets which he now holds which would be available for division under s.79. The wife’s entitlement is not limited to an adjustment for a relative need on the proportion she would be entitled to a as a result of her direct contribution to currently held property available for division. Indirect contributions as well as non-monetary contributions for parenting and home making are to be accounted for. Contributions to property which is no longer held are also to be accounted for. Thus, even if it is true that any property to which the wife made a direct or indirect contribution has been dissipated, this does not mean she would have no claim against currently held property. It is clear that the wife has had virtually all the care of the children since separation and since the husband claims to have exhausted his pre-separation assets and started to rebuild his assets.

3. In all the circumstances, I am not satisfied that the wife would be significantly better off if she was left to her remedies against the husband which are independent of the Family Law Act because I do no known enough about the husband’s current overall financial situation although I cannot estimate with any confidence what the wife is likely to receive under s.79 or if she is left to her other remedies. This is despite the fact that the sale of the C property will attract capital gains tax of $180,000.00 to be paid, according to the husband’s submissions by the husband, and that the $366, 766.00 which was originally the net proceeds of the sale of the C home has been reduced by $45,000.00 or more because the wife received $25,000.00 and the husband at least $20,000.00 in cash from it. The wife’s case against the husband in Equity is so weak it is worth very little if anything.

4. Thus, I am left to consider the issue of hardship. The husband says it is a long time since the parties separated and divorced and that he has managed his affairs on the understanding that the wife would and could make no s.79 claim, reinforced, he says, by the fact that he now knows the wife received legal advice on her rights under s.79 and did not want to pursue them and that five years have passed since the wife could commence s.79 proceedings without leave. He further says he is in poor financial circumstances and needs what is left of the proceeds of the sale, the only property he has in Australia, as he says, “to secure his position”. Of course, this statement and his statement of financial circumstances assume that the funds in Australia are his and ignore the possibility that they are held in trust for the children. The husband seems to deal with them as though there are his when it suits him and, when convenient, to allege there is a genuine trust for the children. As I have said, there is a paucity of detail in support of his assertion that he is in poor financial circumstances. Because of the different costs of living in South Africa when compared with Australia, it could well mean that if he recovers even a modest part of the moneys held in Australia, i.e. after capital gains tax, and he is in the financial situation his financial statement superficially indicates, he might well be able to lead a comfortable life because of his and his wife’s wages of $920.00 and $770.00 respectively, assuming the trust on behalf of the children is not a sham and none of the trust monies are available to him or the wife.

5. There is still no doubt that the mere loss of her right to bring s.79 proceedings is to be regarded as a substantial detriment to the wife. Her claim if leave is granted is likely to have significant, if not great value, to her. By comparison, if she has no claim, she might be left with very little to show for the contributions she has made, especially those made as a parent since separation. The evidence is quite insufficient to satisfy me the wife has any significant right to continue to receive accommodation by way of payment of her rent or at all. There is a valid statement in the evidence that the husband has recently agreed to pay her rent, but it does not say what the consideration for the agreement was, if anything, and the wife’s evidence is to the effect that the period for which the rent would remain payable is of the husband’s choice.

6. The wife failed to get advice at an appropriate time. The advice she got was well before the divorce. To a significant degree, the failure of the wife to get advice at the appropriate time, that is when she accepted the arrangement involving the deed of the purchase of the C house and, after that within one year of the divorce, was probably because she trusted her husband and has been given a sense of false security by the deed, the arrangement and the letter accompanying it. These matters balance the fact that the husband relied on the wife’s inaction to organise his affairs.  The wife’s inaction was to a significant extent probably caused by the husband’s conduct. Her failure to sign the deed is inexplicable to a lawyer, but was probably due to ignorance, or inadvertence.

7. I conclude that the clear hardship that the wife will suffer by having no property case is greater than that which the husband will suffer if she is allowed to pursue a case. The latter can be accounted for to a significant extent in the s.79 proceedings themselves because s.75 (2) (o) requires the Court to take account of any fact or circumstances which the justice of the case requires. It is therefore appropriate to exercise my discretion in favour of the wife, I shall grant leave to her to commence s.79 proceedings out of time.

8. The order I shall make is to grant leave to the wife pursuant to s.44 (3) of the Family Law Act 1975, as amended, to commence proceedings against the husband pursuant to s.79 of the Act by filing within one month of today an amended application for final orders in proceedings. SYC2089 of 2009. She will then be able to use the usual practice and procedures under the Rules of Court to pursue the husband for more enlightening information about and amend her application to meet the situation which it emerges.

I certify that the preceding thirty six (36) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cohen.

Associate: 

Date: