NESBITT & NESBITT
[2020] FamCA 359
•14 May 2020
FAMILY COURT OF AUSTRALIA
| NESBITT & NESBITT | [2020] FamCA 359 |
| FAMILY LAW – PROPERTY SETTLEMENT – Leave to file application out of time – Where the husband seeks leave pursuant to s 44(3) of the Family Law Act 1975 (Cth) to institute proceedings pursuant to s 79 of the Act eight years out of time – Where the wife opposes the granting of leave – Where the parties separated in 2008 and divorced in 2011 – Where the husband will suffer if leave is not granted – Where the husband has adequately explained the delay – Leave granted. FAMILY LAW – PROPERTY – INJUNCTIONS – Where the husband also seeks that the wife be restrained from dealing with two properties owned by a family trust – Where there is no evidence of a risk of the wife disposing of the property – Application dismissed. |
| Family Law Act 1975 (Cth), ss 44(3), 79, 114 Family Law Rules 2004 (Cth), r 13.05 |
| Aldred & Aldred (No 2) (1985) FLC 91-602 Althaus & Althaus (1982) FLC 91-233 Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 Frost and Nicholson (1981) FLC 91-051 Gadzen & Simkin (2018) FLC 93-871 Gallo v Dawson (1990) 93 ALR 479 Hall & Hall (1979) FLC 90-679 Kennon & Spry (2008) FLC 93-388 Mullen & De Bry (2006) FLC 93-293 Richardson & Richardson [2008] FamCAFC 107 Sharp & Sharp (2011) 50 Fam LR 567 Waugh & Waugh (2000) FLC 93-052 Whitford and Whitford (1979) FLC 90-612 |
| APPLICANT: | Mr Nesbitt |
| RESPONDENT: | Ms Nesbitt |
| FILE NUMBER: | BRC | 1525 | of | 2020 |
| DATE DELIVERED: | 14 May 2020 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Carew J |
| HEARING DATE: | 5 May 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr J. Bunning |
| SOLICITOR FOR THE APPLICANT: | Shanahan Family Law |
| COUNSEL FOR THE RESPONDENT: | Ms A. Black |
| SOLICITOR FOR THE RESPONDENT: | Butler McDermott Lawyers |
Order
Pursuant to s 44(3) of the Family Law Act 1975 (Cth) (“the Act”) the applicant be granted leave to institute proceedings pursuant to s 79 of the Act by filing an amended Initiating Application particularising the Order sought by him within 14 days of the date of this Order.
The respondent file an amended financial statement within 7 days.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Nesbitt & Nesbitt has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 1525 of 2020
| Mr Nesbitt |
Applicant
And
| Ms Nesbitt |
Respondent
REASONS FOR JUDGMENT
Mr Nesbitt (“the husband”) applies for leave to institute property proceedings against Ms Nesbitt (“the wife”) 8 years out of time. The wife opposes leave being granted.
The application arises in circumstances where the husband was given 5 months to live in 2017 but as a result of medical intervention his prognosis is now much more favourable. In March 2018, the husband and wife received a payout from a terminal illness insurance policy of about $1.5 million which the husband agreed should be settled upon a family trust for the discretionary benefit of the wife and the parties’ three adult children. The wife and her brother are the trustees of the trust. Until March 2019, the husband was living in a home purchased by the trust and received other benefits from trust money.
The husband brings this application in circumstances where he says the wife will no longer provide any benefits to him and where he asserts he was manipulated into settling the insurance proceeds upon a family trust in which he is not a beneficiary.
Why is leave required?
Section 44(3) of the Family Law Act 1975 (Cth) (“the Act”) imposes a 12 month limitation period for the institution of property settlement proceedings from the date a divorce order takes effect (in this case, 3 April 2012), unless the Court grants leave or both parties to the marriage consent. An applicant may not be granted leave to institute proceedings after this time unless the Court is satisfied that hardship would be caused to a party to the marriage or a child if leave were not granted (s 44(4)).
There are two steps in the determination of an application for leave under s 44(3), although there is some overlap within each step. The applicant is firstly required to establish hardship and secondly, that the discretion should be exercised in favour of granting the extension of time.[1]
[1] Whitford and Whitford (1979) FLC 90-612 at 78,146 (“Whitford”); see also Sharp & Sharp (2011) 50 Fam LR 567 at 570, [22] (“Sharp”).
It is generally considered that “where there is delay the whole quality of justice deteriorates”[2] but the overriding consideration is whether an extension of time is necessary in order to effect justice between the parties.[3]
[2] Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 551 per McHugh J; Sharp (n 1) at 569, [12] citing R v Lawrence [1982] AC 510 at 517.
[3]Gallo v Dawson (1990) 93 ALR 479 at 480.
The principles to be applied when considering whether or not hardship has been established are as follows:[4]
a)The mere loss of a right to institute the proceedings will not of itself establish hardship;[5]
b)The applicant should establish a “real probability of success”[6] if leave is granted, although that does not mean that success need be certain, rather what is required is “a reasonable claim to be heard by the court”[7] or what is often referred to as “a prima facie claim” worth pursuing;[8]
c)“If the probable result of the hearing on the merits is that the hardship is not likely to be alleviated, then the Court cannot be satisfied that the applicant or a child would suffer hardship if leave were not granted”;[9]
d)While the entitlement sought to be pursued by the applicant need not be a substantial one,[10] if the costs associated with the claim exceed the likely award, “ordinarily hardship would not result if leave to institute proceedings were not granted”;[11]
e)For the applicant to remain “tied into a financial dependence” upon the respondent may amount to hardship.[12]
[4] Whitford (n 1) at 78,145; Frost and Nicholson (1981) FLC 91-051 at 79,423; Althaus & Althaus (1982) FLC 91-233 at 77,266–7 (“Althaus”); Sharp (n 1);
[5]Whitford (n 1) at 78,144.
[6] Ibid at 78,144.
[7]Hall & Hall (1979) FLC 90-679 at 78,627.
[8]Sharp (n 1) at [18]; Gadzen & Simkin (2018) FLC 93-871 at 78,594, [37].
[9]Whitford (n 1) at 78,144.
[10] Ibid at 78, 145.
[11]Whitford (n 1) at 78,145; see also Sharp (n 1) at 577, [69], [72].
[12]Aldred & Aldred (No 2) (1985) FLC 91-602 at 79,870.
Even where hardship is established the Court retains a discretion whether or not to grant leave.[13] The non-exhaustive list of matters relevant to the exercise of the discretion where hardship is established include the following:[14]
[13]Whitford (n 1) at 78,146; see also Sharp (n 1) at 570, [22].
[14]Whitford (n 1) at 78,146.
a)The length of the delay;
b)The reasons for the delay for the whole period;[15]
c)The strength of the applicant’s case on the merits;[16]
d)The degree of the hardship which would be suffered unless leave were granted;
e)Any relevant conduct of the applicant;[17]
f)“The absence of any significant property at the time when the proceedings should have been instituted, does not (as a matter of law) preclude the grant of leave under s 44(3) to institute proceedings at a subsequent time when some property has become available for distribution between the parties. … in such circumstances the discretion to grant leave should be exercised with great care”.[18]
g)The prejudice occasioned to the respondent by reason of the delay;
h)“The law presumes prejudice to flow to a person sought to be joined in litigation after the effluxion of the relevant time limits”;[19]
i)Prejudice to the respondent may mean “that a party is faced with an action which he or she had no reason to expect or had been led to believe would not be brought.”[20]
[15]Althaus (n 4) at 77,267.
[16] See also Sharp (n 1) at 573, [36], 577, [70], [73].
[17] Ibid at 573, [38].
[18]Richardson & Richardson [2008] FamCAFC 107 at [23].
[19]Sharp (n 1) at 580, [97].
[20]Frost & Nicholson (1981) FLC 91-051 at 76,424.
Before applying the relevant principles to the circumstances in this case it is necessary to set out some background.
Background
The husband and wife commenced cohabitation in 1988, married in 1994 and separated in late 2008. The husband and wife divorced in 2011. They have three adult children aged 24, 23 and 18, two of whom are said by the wife to suffer unspecified disabilities and one of whom lives with the wife.
The husband is 60 years of age and in receipt of a pension. He lives with his sister.
The wife is 55 years of age and unemployed. The wife contends she is in poor health.
The husband and wife lived in Country C until separation whereupon the wife and children returned to Australia. The husband did not return to Australia until 2017.
In 2001, the husband and wife each obtained a policy of life insurance on the other with P Company (a life insurance company).
Between 2006 and 2009 the husband was treated for depression, anxiety and insomnia including being admitted to a private psychiatric centre for a number of months in 2007.
In 2006 it seems the parties “lost most of their assets”, and during the period 2007 to 2010 the husband was in receipt of an income protection insurance payments of about $65,000 per annum, which he continued to share with the wife after separation.
The husband contends that “from around 2012 onwards” he started getting really sick. He spent a lot of time in bed. He suffered from headaches, nausea and fatigue. He had to employ staff to undertake the manual work in his business. After a number of misdiagnoses, the husband was finally diagnosed with aggressive skin cancer in late 2014. The husband underwent a number of operations followed by radiation therapy.
On 17 December 2012, the wife contends that she and the husband entered into a Separation Maintenance and Property Agreement (“the agreement”) in Country C (prepared by a solicitor) to finalise their property settlement. An undated, but signed, copy of the agreement forms part of the material relied upon by the wife although the year of the agreement is noted to be 2008. The husband says he does not recall signing the agreement. The agreement provides for each party to keep what they have in their possession or name and for each to receive half of “recovery of any assets currently in litigation in Country C.” The husband was involved in litigation in Country C in relation to his company during the period 2007 to October 2009 when the proceedings settled. There is no material before me about the payment received by each party, if any.
Although there is no mention in the agreement of the husband’s superannuation, the wife contends she was to receive the husband’s superannuation, a contention seemingly supported by a letter from the husband to the wife’s solicitor dated 13 December 2012 which provides as follows:
Further to your discussions with [the wife] regarding my Superannuation Policy Number …, please accept this letter as my confirmation that 100% of my Superannuation Fund is to be transferred to her as per our divorce agreement.
On 2 January 2013, the wife sought to obtain the husband’s superannuation with P Company of $30,892. The husband says that the wife’s attempt was refused by P Company.
Although not mentioned in the agreement, there remains a property from the parties’ marriage described as ‘the second property in City B Country C owned by H Trust’. The husband contends that this property was transferred to the “[wife]’s family trust” in about 2006 or 2007 and that the wife receives rent from this property. There is no material before me about the H Trust and the wife does not mention this property. The husband also contends the wife received an inheritance from her father’s estate in about 2017 of $500,000, which he believes is held in a trust with her siblings.
Inexplicably, the wife’s financial statement filed in the proceedings fails to disclose any information at all about her financial situation, despite the requirement in r 13.05 of the Family Law Rules 2004 (Cth) that, “[a] party starting, or filing a response or reply to, a financial case (other than an Application for Consent Orders) must file a financial statement at the same time”. The term “financial case” is defined in the dictionary to the rules as including an application “for permission to start a property case”.
In around 2012 the husband established a business in Country C which he operated until November 2017. Despite this, the husband contends that he does not recall much between approximately 2012 and 2017 “due to the high doses of pain relief medication” he was taking.
In October 2017, the husband was diagnosed with terminal cancer and given about 5 months to live.
The material annexed to the husband’s affidavit includes two life insurance claim forms signed by him. The first is dated 12 October 2017 and the second is dated 16 October 2017. Both claim forms are in relation to policy number … . The contact details on each form refer to both the husband and the wife. The claim forms are each signed by the husband and there is a body of information apparently provided by the husband and a treating doctor in Country C about the husband’s medical conditions. Included in the husband’s statement is an assertion that he has been experiencing “really bad memory problems”. The first claim form indicates that the life insured is the husband and the name of the account holder is the wife.
The husband contends that in about November 2017, the wife “convinced” him “that given the policy was in both our names and my terminal diagnosis that the funds should go into a Trust for the benefit of her and the children. I agreed as I wanted to provide for [the wife] and children given I was only expected to live for another 5 months.”
A firm of solicitors in Region D in Queensland prepared a Trust Deed and on 8 March 2018 the N Family Trust was established. The wife and her brother are joint appointors and trustees and the wife and children are the beneficiaries. The husband is not a beneficiary.
On 2 February 2018, the husband underwent further surgery which involved severing his left ear and a significant portion of the left side of his face.
On 20 February 2018, the husband emailed the solicitor preparing the Trust Deed and said:
Please find attached P Company 3rd Party Documents Signed.
At no time was I have the proposer and the insured. Its absurd. How can the life insured own the policy. The Owner of the policy would die with the life insured??????
It has never been my intent to be a partner in the death policy. It has always been my intention that Ms Nesbitt was the owner of the policy with the proceeds therefrom being for Ms Nesbitt and the Children equally.
Please contact me on … if you need any further information.
(as per original)
On 9 March 2018, a cheque was received from P Company in the joint names of the husband and wife for $1,502,408.
The husband says in his affidavit:
44.Myself, Ms Nesbitt and the children had discussions and decided to buy the property located at J Street, Town F (“Town F”) from the terminal illness payout. The idea was as a family, we would setup a family business on the property to bring the family back together.
Between 6 March 2018 and 11 May 2018, the husband received radiation therapy. In an undated letter from Professor G, Senior Radiation Oncologist, K Hospital, he says:
This letter is to confirm you (sic) that Mr Nesbitt has been diagnosed with locally advanced high risk skin cancer of the left face, for which has (sic) received 30 fractions of post-operative radiotherapy (daily) which commenced on the 6th of March and was completed in May 2018.
Mr Nesbitt is likely to experience acute toxicities during and after treatment up to 3 months. Side effects may include fatigue, dermatitis, xerostomia, dysgeusia, unilateral hearing loss, local inflammation and tenderness. Late toxicities not expected to lead to disability and high chance of cure anticipated.
In August 2018, the property at J Street, Town F (“the Town F property”) was bought in the name of the N Family Trust, and the husband and one of the adult children took up occupation with plans to establish a business in the property. The husband contends that the wife changed her mind in relation to the arrangement and required the husband to leave the property in January 2019.
Another property was bought in the name of the N Family Trust and is occupied by the wife and one of the adult children.
In December 2019, the wife obtained a protection order in her favour against the husband and the adult son who was living at the Town F property.
The husband contends that the wife is refusing to give him “any significant funds from my terminal illness payout” and that when he asked her to be reimbursed for the money he has spent towards the Town F property, the wife told him she does not have any more money to give him.
The husband had further surgery in January 2020 to remove teeth as a consequence of the radiation therapy. The father also requires surgery for facial reconstruction.
The husband filed an application on 11 February 2020 for leave to institute property proceedings out of time.
The assets identified by the husband include the following:
ASSETS
ESTIMATED VAULE ($)
The second property in City B Country C (owned by H Trust)
$300,000
J Street, Town F (owned by N Family Trust)
$300,000
L Street Suburb M (owned by N Family Trust)
$750,000
Equipment and tools
$30,000
Total
$1,380,000
Discussion
This matter proceeded on the papers i.e. no application for cross-examination was made by either party. The summary determination of an application for leave to institute proceedings is generally the approach taken to such hearings.[21]
[21] Frost & Nicholson (1981) FLC 91-051 at 76,423 per Nygh J; Hall & Hall (1979) FLC 90-679 at 78,627 citing with approval Lindenmayer J in Perkins & Perkins (1979) FLC 90-600; cf. Sharp (n 1).
The difficulty for the husband establishing a prima facie case is that the identified property is owned by family trusts. The trustees and appointors of the N Family Trust are the wife and her brother and the non-exhaustive list of discretionary beneficiaries include the wife and the three adult children. The husband does not fall within the class of potential beneficiaries. However, if the wife controls the trust and there is no obligation to apply the assets or income of the trust to any particular beneficiary, the assets of the trust may be regarded as property of the wife from which a property adjustment order is made.[22]
[22] Kennon & Spry (2008) FLC 93-388 per French CJ and the joint judgment of Gummow and Hayne JJ at 83,034, [77]–[80] (“Kennon & Spry”).
The wife argues that she does not control the trust and particular reference is made to the following provisions of the trust deed:
12.7…
(a) the Trustees must make their decision by unanimous resolution in meetings, …
14.4 … the Appointors must act unanimously.
It is submitted on her behalf that the wife “in her capacity as Trustee, has never controlled the Trust without the consent of her brother, as Trustee”. I have some difficulty accepting that submission in circumstances where the wife does not give that evidence. Indeed the wife makes no mention of her brother in her affidavit material, other than that she instructed her solicitor to set up a discretionary trust in her and her brother’s name. The wife’s affidavit material gives the impression that she treats the trust assets as her own and that decisions about their use are made either by her alone or in conjunction with the husband. For example, the wife deposes as follows:
33. On 9 March 2018, after deposition the cheque into my account, I withdrew $83,914.64 from the Trust account.
34. Those funds were applied the following way:
a.$33,914.64 to Westpac Bank for payment of [the husband’s] credit card debt;
…
f.Approximately $5,000 was given to [the husband] in cash;
…
35. On 26 March 2018, I withdrew $23,000 from the Trust account for [the husband] so that he could purchase a second hand Motor Vehicle 1. [The husband] wanted to go travelling, so he was also given funds from the Trust to fit out the Motor Vehicle 1 as he requested the money.
…
37. On 24 June 2018, I withdrew $2,388 from the Trust account for [the husband] to purchase what I believe was a new TV, a smart phone, a laptop. Those funds came out of the $20,000 loan.
38. On 24 June 2018, I also withdrew $12,500 from the Trust account for [the husband] being the remaining balance to make up the $20,000 loan. This loan has not yet been repaid.
…
41. The Trust also paid for everyday living expenses for [the husband] and I and the children and outgoings on the two (2) properties.
42. Whenever [the husband] requested funds by way of a loan from the Trust account, I would give them to him.
…
49.… I have always acted in good faith in providing support, care and exercise decisions for [the husband] as he is legally incapacitated. There is no dispute that I have been [the husband’s] carer and his Power of Attorney and the sole beneficiary of his life insurance pay out. We have established a family Trust and made a joint decision to acquire assets to be handed down to our children.
50. [The husband] has been involved in most of the decisions relating to the expenditure of the insurance pay out. A significant amount of the funds (that has not been used to purchase property for our children) were used for [the husband’s] medical bills and anything else [the husband] sought funds for, as he demanded case from me and I am not able to specify what he applied those funds to.
In my view, the evidence suggests that despite the provisions of the trust deed, the wife has made all decisions relating to the operation of the trust to the exclusion of her brother and thus appears to control the trust. Indeed, in the wife’s written submissions she also refers to the prejudice she would suffer if she were unable to deal with “her assets” until the end of the substantive matter if the injunctive relief were granted.
In the circumstances of this case, I am satisfied that the husband has established a prima facie case for a property adjustment order. Matters that I have particularly taken into account include the following:
a)The assets of the N Family Trust were entirely sourced from a terminal illness insurance policy referable to the husband;
b)It appears that the policy was taken out early in the marriage in or about 2001;
c)The proceeds of the policy were paid jointly to the husband and wife;
d)The wife has utilised the capital of the trust at her discretion and/or in consultation with the husband;
e)“The assets would have been unarguably property of the marriage absent subjection to the Trust”;[23]
f)The marriage was a long one in which each party made significant contributions.
[23]Kennon & Spry at 83,032, [66].
If leave is not granted the husband will lose any opportunity to claim a share of the trust assets and will forever be dependent upon the whim of the wife to continue to support him. The potential claim is not trifling.
I am satisfied that the husband would suffer hardship if leave were not granted.
I turn now to consider whether the discretion to grant leave should be granted. The husband has a long history of illness including mental illness. However, the husband’s mental illness appears to have been most acute in or about 2007 when he was admitted to a psychiatric facility. Upon discharge the husband continued to operate businesses and conduct legal proceedings which concluded in 2009. The parties were divorced in 2011. The husband does not specifically address the delay from the date of divorce to the date the limitation period expired although he does depose to suffering from various symptoms from 2012. The husband nevertheless established a new business in 2012 which he operated until 2017. It does appear that the husband experienced ongoing and debilitating health issues throughout this period right up to the current time. He has undergone numerous operations and other medical interventions and requires further treatment.
The husband’s delay in seeking leave until February 2020 seems to relate to four fundamental reasons. Firstly, his ongoing health problems and the impact this had on his life. Secondly, the absence of any significant property until March 2018. Thirdly, the husband gave up any interest in the insurance funds because he was told he only had 5 months to live. And, lastly, the wife was supporting him until they had a falling out in or about December 2019. In my view, the husband has adequately explained the delay in instituting proceedings or seeking leave to do so.
The wife will suffer prejudice if leave is granted. Twelve years have now passed since the parties separated and at some point, at the latest in 2012, the parties entered into an agreement to settle their property entitlements but there is no suggestion that the agreement ousts the jurisdiction of this Court. The husband is over eight years out of time to bring an application for property settlement as of right.
It is argued by the wife that she had no reason to suspect that the husband would commence legal proceedings but in my view that must be considered in the context of the husband’s prognosis in 2018 when the insurance payment was received. Neither party thought the husband would live beyond that year. It was in those circumstances that the N Family Trust was established for the benefit of the wife and the children.
In the circumstances of this case I come to the conclusion that leave to institute proceedings should be granted.
injunction
The husband also seeks that the wife be restrained from dealing with the two Australian residential properties owned by the N Family Trust.
Under s 114(1) of the Act, the Court has power to ‘make such order or grant such injunction’ in relation to the property of a party to a marriage as the Court ‘considers proper’ (see s 114(1) of the Act)
Prior to granting an injunction, the following matters need to be considered:[24]
(a)whether there is a serious issue to be tried;
(b)the balance of convenience including whether there is any evidence of a risk of disposal of assets if the injunction is not granted.
[24]Mullen & De Bry (2006) FLC 93-293 at 80,996–9, [41], [43]-[52].
If it is considered appropriate to issue injunctions, the Court should fashion the injunctions to the minimum extent required.
Submissions in support of an injunction were brief. The husband’s case at its highest is that he is “concerned” that the wife is dissipating funds and refers to a payment made by the wife on 9 March 2018 of $30,000 including a wedding gift to a third party. He says he “believes” the wife is planning to sell the Town F property as quickly as possible so she can permanently move to Country C. He does not provide any evidence which informs this belief and it seems unlikely given that the wife has lived in Australia since 2008 and her three adult children live in Australia, two of whom she says have disabilities. Additionally, the family trust owns two properties in Australia so even if the wife sold the Town F property as the husband believes she intends to do, there is a remaining and more expensive property.
It was readily conceded on behalf of the husband that his real intention was to obtain some “security” in the property proceedings, but that is not a proper basis for the granting of an injunction.[25]
[25] Waugh & Waugh (2000) FLC 93-052 at 87,810, [45]–[46].
In the absence of any evidence of a risk of the wife disposing of property that would defeat the husband’s potential claim, I propose to dismiss the application for an injunction.
I certify that the preceding fifty-nine (59) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Carew delivered on 14 May 2020.
Associate:
Date: 14 May 2020
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