Panwar and Panwar & Anor - [2020] FamCA 480

FAMILY COURT OF AUSTRALIA

PANWAR & PANWAR AND ANOR

[2020] FamCA 480

FAMILY LAW – PRACTICE AND PROCEDURE – Application for extension of time – to bring s 79 proceeding – informal property settlement undertaken in 2015 – husband declared bankrupt – trustee pursuing wife for amounts allegedly owing under s 120 and 121 of the Bankruptcy Act – relevant criteria for grant of extension of time – extensive review of unsettled authorities – leave granted.

FAMILY LAW – BANKRUPTCY – whether trustee’s application for relief should be permitted to go forward yet wife’s s 79 application not so permitted – relevance of that consideration to the grant of leave – leave granted.

Bankruptcy Act 1966 (Cth) ss 30, 58, 120, 121
Family Law Act 1975 (Cth) ss 44(3), 44(4), 75(2), 79
Matrimonial Causes Act 1959 (Cth)

Adair v Milford [2015] FamCAFC 29
Anscor Pty Ltd v Clout (2004) 135 FCR 469
Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337
Board of Trade v Cayzer, Irvine & Co Ltd [1927] AC 610
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
Cholmondeley v Clinton [1820] 37 ER 527
Commissioner of Taxation v Worsnop (2009) 40 Fam LR 552
Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588
Gallo v Dawson (1990) 64 ALJR 458
Hughes v National Trustees Executors & Agency Co of Australasia Ltd [1978] VR 257
In the Marriage of Althaus (1979) 8 Fam LR 169
In the Marriage of Biltoft (1995) 19 Fam LR 82
In the Marriage of Carlon (1982) 8 Fam LR 729
In the Marriage of Frost & Nicholson (1981) 7 Fam LN N9
In the Marriage of Hall (1979) 5 Fam LR 411
In the Marriage of Howard (1979) 8 Fam LR 178
In the Marriage of Kercher (1981) 7 Fam LR 216
In the Marriage of Leibinger (1985) 11 Fam LR 33
In the Marriage of McDonald (1977) 31 FLR 426
In the Marriage of Perkins (1979) 4 Fam LR 634
In the Marriage of Petersens (1981) 7 Fam LR 402
In the Marriage of Prince (1984) 9 Fam LR 481
In the Marriage of Rowell; Deputy Commissioner of Taxation (Intervener) (1989) 96 FLR 449
In the Marriage of Swallow (16 September 1977)
In the Marriage of Walker (1984) 9 Fam LR 983
In the Marriage of Whitford (1979) 4 Fam LR 754
In the Marriage of Woodland & Todd (2005) 33 Fam LR 179
Johnson v Johnson (1999) 26 Fam LR 475
Jones v Bellgrove Properties Ltd [1949] 2 KB 700
Lagioia & Rapino [2020] FamCA 11
MacKenzie v MacKenzie (1978) 4 Fam LR 374
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705
Official Trustee in Bankruptcy v Lopatinsky (2003) 30 Fam LR 499
Owen v De Beauvoir [1847] 153 ER 1307
Palata Investments Ltd v Burt & Sinfield Ltd [1985] 2 All ER 517
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
R v Lawrence [1982] AC 510
Re Chemaisse & Commissioner of Taxation (No 3) (1990) 13 Fam LR 724
Richardson v Richardson [2008] FamCAFC 107
Salido v Nominal Defendant (1993) 32 NSWLR 524
Gerber & Beck [2020] FamCA 210
Sharp v Sharp (2011) 50 Fam LR 567
Shedden v Shedden (1965) 7 FLR 303
Stanford v Stanford (2012) 247 CLR 108
Trustee of the Property of G. Lemnos (a bankrupt) v Lemnos (2009) 41 Fam LR 120
Walcott & Walcott [2020] FamCA 218

G. E. Dal Pont, Law of Limitation (LexisNexis Butterworths Australia, 2016)
Patrick Parkinson, Why are Decisions on Family Property so Inconsistent? (2016) 90 ALJ 498

APPLICANT:

Ms Panwar

FIRST RESPONDENT:

Mr Panwar

SECOND RESPONDENT:

Mr Nash (trustee-in-bankruptcy)

FILE NUMBER:

MLC

14650

2019

DATE DELIVERED:

18 June 2020

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

The Honourable Justice Wilson

HEARING DATE:

2 June 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr P. Fary

SOLICITOR FOR THE APPLICANT:

Neylon Lawyers

COUNSEL FOR THE RESPONDENT:

Not applicable

SOLICITOR FOR THE RESPONDENT:

Not applicable

COUNSEL FOR THE INTERVENOR:

Mr G. Thompson

SOLICITOR FOR THE INTERVENOR:

Lennon Lawyers

Orders

The applicant’s application filed 20 December 2019 for an order pursuant to s 44(3) of the Family Law Act is granted.
I extend the date for commencing this proceeding to 20 December 2019.
On or before 4pm on 25 June 2020 the parties must bring in minutes that provide for ongoing case management having regard to the fact that this case is now in my docket.

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 Panwar & Panwar 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 MELBOURNE

FILE NUMBER: MLC 14650 of 2019

Ms Panwar

Applicant

And

Mr Panwar

First Respondent

And

Mr Nash (trustee-in-bankruptcy)

Second Respondent

REASONS FOR JUDGMENT

Introduction

On 20 December 2019 the applicant commenced this proceeding for property alteration orders under s 79 of the Family Law Act for which she needed the grant of an extension of time under s 44(3) of the Act.
The trustee-in-bankruptcy of the respondent husband opposed the grant of leave on seven principle grounds including delay, prejudice, weakness of the applicant’s case and other grounds. The trustee said the wife as the applicant bore the burden of establishing the propriety of an order for the grant of leave and that she had failed to discharge that onus.

Synopsis

For the reasons that follow in my judgment leave is be granted pursuant to for the applicant to bring this proceeding under s 79 of the Family Law Act.

Factual overview

Certain aspects – but not all of – the factual matrix against which this application was set seemed tolerably uncontroversial. The respondent, aged 59, is qualified as a technician. The applicant, aged 58, is engaged in home duties. They married in … 1985. Between 1985 and 2013 or thereabouts they traded under the business name C Business, the owner which was a company owned and controlled by them, D Pty Ltd. They have one adult child. On 1 July they separated and undertook an informal property settlement, the details of which are set out below. Their marriage was dissolved on … 2016. On 4 May 2018 a winding up order was made in relation to D Pty Ltd.
The trustee was appointed as sole trustee on 31 January 2019 pursuant to the sequestration order made on that date by a registrar of the Federal Circuit Court of Australia. The registrar recorded the date of the act of bankruptcy as being 24 September 2018. The official receiver certified the trustee’s appointment to the bankrupt estate of the respondent on 31 January 2019.
Two parcels of land were relevant to this case. The first was the land described in certificate of title volume …01 folio …73 being the whole of the land known and described as E Street, Suburb F (“Suburb F”). The other relevant parcel of land was the land described in certificate of title volume …80 folio …28 being the whole of the land known and described as G Street, Suburb H (“Suburb H”). In the trustee’s affidavit made 20 April 2020 at paragraph 5 he described the relevant title particulars for Suburb H as being volume …39 folio …98. That was the parent title. The correct title particulars were volume …80 folio …28.
The relevant title historical extracts revealed several transactions relevant to Suburb F. In no special order –
a)the wife and the husband were registered as joint proprietors of an estate in fee simple on 18 January 1999;
b)they granted mortgage …8A in favour of National Australia Bank Ltd (“NAB”) which was registered on 15 September 2000;
c)on 6 August 2003 discharge of mortgage …8A was registered;
d)they granted mortgage …0K in favour of Australia and New Zealand Banking Group Limited (“ANZ”) which was registered on 6 August 2003;
e)on 8 September 2015 discharge of mortgage …0K was registered;
f)they granted mortgage …8H in favour of ANZ which was registered on 12 October 2011;
g)on 8 September 2015 discharge of mortgage …8H was registered; and
h)on 8 September 2015 a transfer of registered proprietorship in Suburb F was registered from the wife and husband in favour of Mr J and Ms J.
The trustee deposed in paragraph 3 of his 20 April 2020 affidavit that the wife and husband sold Suburb F to the purchasers, Mr & Ms J, for $950,000 settlement of which was effected on or about 31 August 2015. The trustee did not depose to the source of his information that enabled him to state that the purchasers paid $950,000 for Suburb F.
However, the trustee stated that on 31 August 2015 the respondent received $131,988.99 from the proceeds of sale of Suburb F. On the same day, according to the trustee, the respondent paid the sum of $308,790.59 from the proceeds of sale of Suburb F so as to make a part payment in the purchase of Suburb H.
The relevant title historical extracts revealed several transactions of relevance to Suburb H. In no special order they included –
a)the applicant wife became the sole proprietor of an estate in fee simple in Suburb H on 17 September 2015;
b)the respondent was not registered as having any interest in Suburb H;
c)the wife granted mortgage …8A in favour of ANZ which was registered on 17 September 2015; and
d)the wife acquired her interest as sole registered proprietor from Mr L.
The trustee raised certain factual matters in his affidavit that seemed to be at odds with the documentation he exhibited. For example, in paragraph 6 of his 20 April 2020 affidavit the trustee stated that the respondent (the bankrupt) purchased Suburb H as sole proprietor. The title search in respect of Suburb H showed the applicant,[1] not the respondent, as sole registered proprietor of Suburb H.
[1] Exhibit N3 to the trustee’s affidavit made 20 April 2020, page 3.
The trustee’s case involved two elements. First, the trustee asserted that the respondent received $131,988.99 from the proceeds of sale following settlement of the sale of Suburb F. Second, the trustee asserted the respondent transferred $308,790.59 from the proceeds of sale following settlement of the sale of Suburb F to Westpac Banking Corporation (“Westpac”) for the purpose of making a part payment towards the purchase of Suburb H.
The trustee aggregated the amounts of $131,988.99 and $308,790.59 to arrive at the figure of $440,779.58 being the amount described respectively as the first and second transfers. The trustee said in paragraph 7 of his 20 April 2020 affidavit that he considered that of the sum of $440,779.58, the bankrupt’s share was at least $220,389. He did not say what he meant by the phrase “I do consider the Bankrupt’s share to be at least $220,389,” Presumably he intended to convey the notion by that statement that the respondent’s legal and beneficial entitlement to the sums so transferred was $220,389. Arithmetically the amount of $220,389 was half of the total sums allegedly transferred.
The trustee contended that the two transfers totalling $440,779.58 were void against the trustee pursuant to ss 120 and 121 of the Bankruptcy Act.
The trustee stated in paragraph 8 of his affidavit made 20 April 2020 that the bankrupt received no funds from the sale of Suburb F. That seemed to be at odds with the trustee’s statement at paragraph 4 of the same affidavit that the bankrupt received $131,988.99 from the proceeds of sale of Suburb F. To demonstrate the accuracy of the trustee’s statement that the respondent received $131,988.99, the trustee could so easily have exhibited bank statements illustrating the flow of funds into the respondent’s control of that amount. It was peculiar that no such evidence (as opposed to assertion) was given.
The trustee stated he had written to the respondent seeking payment of the sum of $220,389.
The trustee said the respondent and the applicant divorced on … 2016 so the applicant was out of time to bring this property alteration proceeding incorporating maintenance.
The trustee made a further affidavit on 14 May 2020, this one in response to my orders of 6 May 2020. Those orders were made following a directions hearing at which the trustee’s solicitor informed me that this proceeding had been transferred to this court by O’Bryan J of the Federal Court of Australia after an application in the bankruptcy jurisdiction had been commenced in the Federal Court. To the trustee’s 14 May 2020 affidavit the trustee exhibited a collection of documents, mostly in conformity with my orders made on 6 May 2020. The orders made by O’Bryan J were exhibited in accordance with my requirement for the provision of those documents. It is utile to go to the documents exhibited by the trustee.
On 16 September 2019 the trustee filed an application in the Federal Court of Australia in which he claimed against the bankrupt a declaration under s 30 of the Bankruptcy Act that the sum of $131,988.99 and the sum of $308,790.59 were void under ss 120 or 121 of the Bankruptcy Act. The trustee sought payment of $440,779.58.
In the Federal Court proceeding the trustee relied on his own affidavit that was in largely similar terms to his affidavit made on 14 May 2020 in this proceeding.
In the Federal Court proceeding the trustee exhibited to his affidavit filed in that litigation a letter from the trustee to the wife. That letter was important insofar as it addressed matters that were addressed by the trustee in his 14 May 2020 affidavit in this proceeding. In many respects the trustee’s assertions were differently alleged in that letter and in his affidavit in the Federal Court proceeding. The following represents some of those variances –
a)in the trustee’s affidavit of 20 April 2020 the trustee stated that the respondent received $131,988.99 from the proceeds of sale of Suburb F;
b)conversely, in the trustee’s letter of 19 March 2019 to the wife (the applicant in this proceeding) the trustee stated that the wife received $131,988.99 from the proceeds of sale of Suburb F;
c)in the trustee’s affidavit of 20 April 2020 the trustee stated that the respondent transferred the sum of $308,790.59 from the proceeds of sale of Suburb F to Westpac; and
d)conversely, in the trustee’s letter of 19 March 2019 to the wife the trustee stated that the wife transferred the sum of $308,790 from the proceeds of sale of Suburb F to Westpac for the purchase of Suburb H.
The trustee demanded from the wife payment to him of the sum of $220,389 in default of compliance with which the trustee said he would commence a proceeding against the wife to recover that amount.
Taken in combination, the trustee’s affidavit and his 19 March 2019 letter revealed that the trustee was contending that he sought recovery of the sum of $220,389 from both the applicant as well as the respondent. To the extent that such a claim was made against the wife, as she was not bankrupt, the trustee did not say how he cast his case against the wife under s 120 or s 121 of the Bankruptcy Act.
The statement of claim in the Federal Court proceeding did not take the trustee’s contentions very much further. In it, at paragraph 3 the trustee alleged that the bankrupt and the wife (as respondent to the trustee’s proceeding in the Federal Court) owned Suburb F[2] as joint proprietors. In paragraph 4 the trustee asserted that the bankrupt and the wife sold Suburb F to Mr J for $950,000. In paragraph 5, the trustee alleged (in the passive tense without saying who made the transfer) that the sum of $131,988.99 was transferred to the respondent. Yet in paragraph 6 of the statement of claim the trustee alleged that the “respondent also” transferred the sum of $308,790.59 to Westpac, suggesting that the transfer of the earlier amount of $131,988.99 was likewise effected by him, hence the word “also”. In the same paragraph the trustee asserted, this time in a manner that corresponded to the titles registration documentation that Suburb H was registered solely in the respondent’s name, in that context being a reference to the respondent to the Federal Court litigation, namely the wife. Self evidently, the trustee and his legal representatives erroneously cut and pasted that reference to the proceeding in this court.
[2] By that I mean the property known as E Street, Suburb F, as has been pointed up above.
Solicitors should take greater care in the preparation of affidavits, a matter on which I have twice recently pronounced, the other cases being Walcott & Walcott[3] and Gerber & Beck.[4]
[3] [2020] FamCA 218.
[4] [2020] FamCA 210.
In paragraphs 8 and following of the statement of claim in the Federal Court proceeding the trustee set out the basis of his assertion under s 120 ad 121 of the Bankruptcy Act. He said each transfer was void pursuant to s 121 because –
a)the bankrupt’s main purpose in permitting the two transfers to occur was to prevent the bankrupt’s share of the proceeds of sale of Suburb F being divisible among his creditors or to hinder or delay that process; and
b)at least half of the proceeds of sale would have become part of the bankrupt’s estate available to creditors had the transfers not been made.
The trustee alleged in paragraph 9 that in receiving the first transfer and transferring the second amount the wife did not act in good faith, did not give consideration, did so to prevent the proceeds of sale of Suburb F becoming divisible and she ought to have realised the bankrupt would become insolvent. Those were serious allegations. By asserting the bankrupt’s purpose, necessarily the trustee was asserting the wife’s state of mind in conducting herself.
In paragraph 10 of the statement of claim in the Federal Court proceeding the trustee alleged that the wife gave no consideration for the transfers, that the transfers were at an undervalue and that she gave consideration of less than his half share with the consequence that under s 120 of the Bankruptcy Act each transfer was void.
In paragraph 11 of the statement of claim the trustee contended that the wife failed to pay the trustee $440,779.58 despite request.
The trustee sought orders for the payment to him by the wife of $440,779.58.
The trustee exhibited the orders made by O’Bryan J for the transfer of the Federal Court proceeding to this court.
The trustee filed a third affidavit, it being affirmed on 25 May 2020, although the jurat provision recorded the date 25 June 2020, obviously incorrectly. In any event, the trustee deposed to five appearances before O’Bryan J between 31 October 2019 and 12 February 2020.
The trustee stated in his third affidavit that the bankrupt owed $121,000 to the Australian Taxation Office. He said the liquidators of D Pty Ltd (in liquidation) had lodged a proof of debt in the bankrupt estate of the respondent in this proceeding for $328,120 in relation to funds paid to the bankrupt by the company prior to its winding up.
The trustee said the wife had retained the husband’s full half share in Suburb F amounting to $259,419 with the consequence that the bankrupt’s creditors had not had the benefit of a distribution in their favour of that half share of the proceeds. The trustee said he had an obligation towards the bankrupt’s creditors and that it “would be unjust and prejudicial to their interests for the wife’s claims for a property settlement and her retention of the husband’s half share of (Suburb F) to take priority over the interest of third party creditors”.
The trustee offered an indicative observation of the value of the property to be divided in the case. He conceded the sums he attributed were estimates, as indeed he had to. He was a liquidator who, while no doubt well accustomed to real estate prices was nevertheless not a qualified valuer so his views on a matter beyond his professional expertise were lay views as espoused in Dasreef Pty Ltd v Hawchar[5] and Makita (Australia) Pty Ltd v Sprowles.[6] In all he said the assets amounted to about $618,000 being the net proceeds of a Suburb Q property and the net proceeds of Suburb F. He said the company was valueless. The trustee said superannuation stood at $140,000 for the husband and $308,822 for the wife. So far as liabilities were concerned he said the debt to the ATO was the largest.
[5] (2011) 243 CLR 588.
[6] (2001) 52 NSWLR 705.

The trustee relied on the wife’s delay in dealing with the Federal Court litigation as well as her delay in bringing this property alteration proceeding as a basis for contending that leave to bring this proceeding out of time should be refused. The trustee said the wife had 12 months from 10 December 2016 within which to commence the property settlement litigation and instead, she commenced this case on 20 December 2019, over three years beyond the date limited.
The trustee sought alternative injunctive relief in the event that the wife obtained leave to commence this proceeding out of time. In essence, the trustee sought a freezing order on all assets in the possession and control of the wife.
The wife affirmed her affidavit of 14 May 2020. She gave her occupation as “retiree”. Relevantly paraphrased, in her affidavit she addressed the following matters –
a)she and the respondent married in 1985, separated in February 2016, they divorced on … 2016 and they have one child presently 33 years of age;
b)she brought $5,000 in cash to the marriage;
c)between 1986 and 2017 she worked for two public service agencies;
d)the respondent is professional consultant whose clients included financial institutions;
e)the respondent’s operations were conducted through a business called C Business the owner of which was the company D Pty Ltd of which the applicant was a director between 23 February 1999 and 2 August 2013;
f)between 1985 and 1995 the applicant and respondent operated a joint bank account from which payments of joint living expenses were met;
g)between 1998 and 2006 the entirety of the applicant’s income was deposited into the joint account;
h)from 2006 the wife’s income was paid into her private account from which she deposited certain amounts into the joint account;
i)the respondent attended to most of the parties’ financial affairs during the marriage and he kept their financial records;
j)in 2000 they purchased Suburb F which became their matrimonial home;
k)following her discovery of the respondent’s affair they separated in February 2016;
l)the applicant and respondent decided to divide their property themselves without legal assistance;[7] and
m)not until 2019 did the applicant realise a formal time limit existed (her words) within which she was required to obtain a court order in relation to property settlement and that she realised the consequences of not obtaining a formal order.
[7] Importantly, the wife did not go to the detail of the precise terms of the parties’ so-called informal settlement so it was not possible to assess the justice and equity of it.
The applicant purported to record the parties’ major assets, as she called them in paragraph 13 of her affidavit, as at separation. She did not descend to the details of the parties’ respective financial and non-financial contributions. However, she stated the parties’ major assets were –
a)Suburb F;
b)M Street, Suburb N, Queensland;
c)P Road, Suburb Q;
d)D Pty Ltd;
e)four motor vehicles; and
f)the parties’ respective superannuation.
She said she sold the Suburb Q property in 2012 for $287,000, it having been purchased solely by her in or around 2006. She said she paid the deposit, all loan repayments and all outgoings on the Suburb Q property from her own bank account. She said the loan was $200,000. She said that upon sale, the Suburb Q property yielded a surplus of about $100,000.
She provided no documentation to support her version of events in relation to her acquisition and sale of the Suburb Q property and of the flow of funds, whether in the nature of extracts from the conveyance or bank statements.
So far as Suburb F was concerned, the applicant deposed to the disbursement of the sale price of $950,000. She accounted for eight payees. They were as follows –
a)to ANZ the sum of $409,756.59 being $286,470.71 in repayment of the home loan, $100,179.21 in payment of D Pty Ltd’s overdraft, $12,000 to pay out another account in the name of D Pty Ltd and $11,000 to pay out a credit card maintained by D Pty Ltd;
b)to fund the applicant’s purchase of Suburb H, the sum of $308,625.59;
c)to herself, the sum of $131,988.99; and
d)to herself, the sum of $78,225.
The applicant said that as part of the property settlement into which she and the respondent entered, the respondent retained a variety of items. She said they were –
a)so she said, the benefit of the payments made to the company’s overdraft ($100,179.21), the sum paid to discharge the company’s account ($12,000) and the sum paid to discharge the company’s credit card ($11,000);
b)shares in D Pty Ltd;
c)two motor vehicles namely the Motor Vehicle 1 and the Motor Vehicle 2;
d)sums he had withdrawn from their joint bank account for his sole advantage being $42,000 in 2013;
e)sums the wife paid “over the years” (her words) from her income for his benefit;
f)amounts she paid from her income in relation to Suburb F for their joint benefit;
g)amounts she paid from her income in relation to the Queensland property;
h)amounts the respondent had applied from the couples’ joint account for his sole use;
i)$42,000 that was transferred from the applicant’s savings in 2013 and applied against the account of D Pty Ltd; and
j)the respondent redrew $57,000 between January 2012 and April 2013 from the loan account referrable to Suburb F without the applicant’s knowledge.
The applicant said she had paid amounts that benefitted the respondent. Those were detailed in paragraph 19 of her 14 May 2020 affidavit. Some amounts were modest (for example, payment to the Sheriff following the wheel clamping of the respondent’s car) whereas other sums were large, such as $57,311 paid to persons to repay debts owed by the respondent to his brother and others.
The applicant detailed one amount of $10,000 paid in 2013 and a second amount of $10,000 paid in 2015 referrable to Suburb F, the total of $20,000 being, according to the applicant, for the joint benefit of the parties.
The applicant said the respondent used rental income received in relation to the Queensland property for his personal use and benefit. She said she paid all mortgage loan repayments from her own income. She said those amounts totalled –
a)$44,750 by way of loan repayments;
b)$25,500 by way of mortgage arrears;
c)almost $3,000 to ANZ; and
d)$6,000 for renovation costs following tenants vacating the property.
She said she met the difference between loan repayment amounts and the amount of rent received.
She said the sum of $607,000 was owing in relation to the Queensland property and that in mid 2019 it was worth $585,000 an amount likely to be less in view of the Australia-wide COVID-19 pandemic.
She said that she believed the respondent’s debts had been discharged upon the sale of Suburb F and that he was solvent.
The applicant said that upon her return from an overseas holiday in early April 2019 she ascertained that the trustee was seeking recovery of an amount in excess of $220,000. She said the following in paragraph 27 of her affidavit –
If my application for an extension is not granted, I will suffer hardship because I will not have the ability to seek orders under s 79 of the Family Law Act in circumstances where I refrained from doing so because of my informal property settlement with Mr Panwar.

The application on 3 June 2020

On behalf of the applicant Mr Peter Fary of counsel submitted that the decision of the Full Court of the Federal Court of Australia in Official Trustee in Bankruptcy v Lopatinsky[8] was directly on point both factually and legally. Mr Fary invited me to apply it to the facts of this case. On behalf of the trustee, Mr Graeme Thompson of counsel submitted that the anterior question to be determined was whether the applicant had satisfied the statutory criteria prescribed by s 44(4) of the Family Law Act. Mr Thompson said the applicant had not. Broadly, he pointed to –
a)the lapse of eight years since separation;
b)the lapse of three and a half years since the dissolution of the applicant’s and the first respondent’s marriage; and
c)the effluxion of a substantial amount of time since relevant events carrying with it the usual consequences of witness’ losses of memory and the likelihood of documentation loss or destruction;
[8] (2003) 30 Fam LR 499.
Section 44(3) of the Family Law Act does not admit of straightforward application. For present purposes, it is sufficient to record that its main provision is to the effect that an applicant seeking relief in the court must commence that proceeding within 12 months of the order for the dissolution of marriage unless leave to do so outside of that period is given. The criteria for the grant of leave is not specified in s 44(3).
The case law on whether and in what circumstances leave should be granted under s 44(3) is unnecessarily extensive. Mr Thompson very helpfully reviewed those authorities in comprehensive and exhaustive written submissions that I found particularly useful. In deference to the care taken by Mr Thompson in his analysis of the authorities, I have set out hereunder my consideration of them, of course unwillingly thereby contributing to an already heavily burdened body of learning on point.
The survey commences with the decision of the Supreme Court of New South Wales in Shedden v Shedden.[9] There, Begg J was concerned with an application under the Matrimonial Causes Act for leave to commence a proceeding for maintenance following the dissolution of the marriage. A delay of eight months was involved. While the proceeding involved the legislative precursor to the Family Law Act and on that ground alone the decision was at the periphery, Mr Thompson relied on the threefold statement of general application in that case. Begg J held –
[9] (1965) 7 FLR 303.
a)having regard to the desirability to put an end to litigation, leave to commence a proceeding out of time should not be lightly given;
b)in such an application, the onus is cast on the applicant for leave to show that in all the circumstances leave should be given; and
c)five factors are useful in determining whether leave should be given, namely –
i)the reasons advanced for the failure to make the claim when it should have been made and whether any element of accident or ignorance was involved;
ii)the extent of the delay;
iii)whether or not the delay has prejudiced in any way the ability of the person resisting the claim to present evidence in his defence;
iv)whether or not in all the circumstances the applicant acted reasonably; and
v)whether prima facie evidence existed that the applicant could obtain the relief sought if the application for leave were granted.
Begg J refused the application for leave.
That case was not mentioned in one of the first applications under s 44(3) of the then newly commenced Family Law Act in the unreported decision of Emery J in In the Marriage of Swallow (16 September 1977). Emery J made a number of observations about the general concept of the Family Law Act. This was one –
The general concept of the Act is that once a marriage is dissolved questions of maintenance for wives and property should be disposed of as quickly as possible so that the relationship may be concluded and the parties will revert, as far as is possible, to a single status.
So far as the word “hardship” in s 44(3) was concerned, Emery J held that the word was synonymous with “serious injustice”, for reasons not apparent in the judgment. Emery J spoke of the need for an applicant under s 44 to demonstrate an “adequate and proper reason” why he or she did not apply within the time provided. His Honour also added three elements that must be established “to come within the provisions of” s 44.[10] They were as follows –
a)a prima facie case which is in the circumstances substantial;
b)that to deny the right to litigate that claim would cause hardship to a party or to a child of the marriage; and
c)there is an adequate explanation as to why the claim was allowed to lapse.
[10] The section did not so provide. Precisely why his Honour held that those three stipulations arose from the section is none too easy to tell. In this regard, Professor Parkinson’s statement has validity where he said “family property law is, for the most part, a practice without a theory” in his treatise Why are Decisions on Family Property so Inconsistent? (2016) 90 ALJ 498, 523.
On 2 December 1977 the Full Court (Evatt CJ, Ellis and McGovern JJ) in In the Marriage of McDonald[11] adopted the three point criteria essayed by Emery J in In the Marriage of Swallow.
[11] (1977) 31 FLR 426.
On 28 September 1978 Strauss J in MacKenzie v MacKenzie[12] held that under s 44, in order to grant leave to commence a proceeding outside of the one year prescribed, the court must be satisfied that hardship would result to a party or child if leave were not granted. His Honour followed McDonalds’s case in requiring an adequate explanation to be provided as to why the claim was allowed to lapse and on the facts of that case, Strauss J held that no adequate explanation was given. His Honour refused leave to commence the proceeding.
[12] (1978) 4 Fam LR 374.
Mr Thompson placed considerable store on the decision in In the Marriage of Whitford.[13] There, Asche & Pawley SJJ and Strauss J delivered a unanimous decision from which the following matters may be extracted as representing the ratio decidendi –
a)distinguishing In the Marriage of McDonald (which in turn applied Emery J’s decision in Swallow) the court held that an applicant for leave must establish a prima facie case that in all the circumstances there is a probability both of success and of the hardship being alleviated if the matter were litigated on the merits;
b)for the purposes of s 44(4) “hardship” is akin to concepts as hardness, severity, privation, that which is hard to bear or a substantial detriment;
c)having regard to the nature of the jurisdiction which the Family Court exercises, the court’s discretion under s 44(4) should be exercised liberally in order to avoid hardship;
d)that discretion should be exercised in a manner which could not render nugatory the requirements set by the Act; and
e)the length and reasons for the delay, the prejudice occasioned to the respondent by reason of the delay, the strength and merits of the applicant’s case and the degree of hardship are matters affecting the exercise of the discretion.
[13] (1979) 4 Fam LR 754.
In that case, the facts having no parallel to those with which I am concerned in this case, the appeal from a judge of the Supreme Court of Western Australia was allowed.
In January 1979, in days prior to the internet, Lindenmayer J addressed an application for leave under s 44(3) in In the Marriage of Perkins.[14] His Honour’s decision appears from the report of the case to have been delivered ex tempore. Lindenmayer J’s decision was handed down 17 days after the decision in In the Marriage of Whitford. No reference was made to Whitford in Perkins and Lindenmayer J applied In the Marriage of McDonald even though that case had been distinguished and significantly refined in Whitford.
[14] (1979) 4 Fam LR 634.
Curiously, his Honour’s decision was followed by the court in In the Marriage of Hall.[15]
[15] (1979) 5 Fam LR 411.
On 26 July 1979 a differently constituted Full Court considered s 44 in In the Marriage of Althaus.[16] There, the court held that s 44(3) and s 44(4) were not intended to require a detailed hearing on the merits to determine whether the applicant’s claim will succeed. The court further held that the exercise was to determine whether there was a reasonable claim to be heard as that was the essence of the inquiry whether hardship will be suffered, following McDonald and MacKenzie.
[16] (1979) 8 Fam LR 169.
In Althaus the court addressed what it called “the requirement to give an explanation of the delay in bringing the proceeding”. The court held that consideration must be given to the whole of the period between the date on which the decree nisi was made up to the time of the making of the application.
Then came In the Marriage of Hall.[17] There, Evatt CJ, Fogarty and Yuill JJ considered an appeal from Ellis J who dismissed the wife’s application to commence a proceeding for the alteration of property interests. She was out of the prescribed 12 month period following the making of the decree nisi of dissolution of marriage. The court delivered a unanimous decision applying In the Marriage of Whitford and in the process considering McDonald, MacKenzie, and Perkins. The reasoning of the court in In the Marriage of Hall may be condensed to the following –
a)before the court invokes s 44(3) and the discretionary power conferred thereby, the court must be satisfied that hardship would be caused to a party or to a child if leave were not granted;
b)“hardship” means “substantial detriment”; and
c)delay in commencing a proceeding and the prejudice a respondent might suffer by the grant of leave are matters relevant to the exercise of the court’s discretion.
[17] (1979) 5 Fam LR 411.
On the facts of that case the court took the view that the respondent’s position had not weakened in the 12 months following the decree nisi and that the wife’s explanation for the delay was reasonable. The appeal from the dismissal of the leave application by the first instance judge was allowed.
In In the Marriage of Frost & Nicholson[18] Nygh J applied the criteria of –
a)the existence of a prima facie case;
b)hardship to the applicant; and
c)an explanation for the delay.
[18] (1981) 7 Fam LN N9.
General principles associated with the grant of leave to commence a proceeding out of time were canvassed by a differently constituted full court in In the Marriage of Carlon.[19] The case is significant for several reasons. In no special order they included –
a)the relevant delay being almost four years;
b)the relevant principles that Ross-Jones J applied were those adumbrated in In the Marriage of McDonald; and
c)the applicant was two and a half years out of time when she was first advised that she needed to apply to the court and a further 14 months elapsed before she actually did apply, delay described by the Full Court thus “prima facie this type of delay is absolutely inexcusable”.
[19] (1982) 8 Fam LR 729.
The headnote of In the Marriage of Carlon contains a statement that is not borne out in the reasons of the court. The headnote said “there is no rule of law that if delay is not adequately explained then the application must fail for that reason alone”. The body of the reasons said no such thing. The closest the body of the reasons got to the passage extracted in the headnote was the following in reference to Kercher v Kercher[20] –
In reading the report in Kercher and Kercher, supra, it certainly appears to us on the plain meaning of the words used that each member of the court held that if delay is not satisfactorily explained then the application must for that reason alone fail. If that was indeed the decision then with the greatest respect we cannot agree that such is a correct interpretation of the section.
[20] (1981) 7 Fam LR 216.
That was a far cry from the statement “there is no rule of law that if delay is not adequately explained then the application must fail for that reason alone”.

Then, the court spoke of “the only essential fact or condition precedent which must be established”. The court said that the essential fact or condition precedent was that the applicant or child of the marriage would suffer hardship if leave were denied.
The court embraced the two-question test propounded by Whitford. They were –
a)first, whether the court is satisfied that hardship would result if leave is refused; and
b)second, if so satisfied, whether in the exercise of its discretion, the court should grant or refuse leave to commence the proceeding.
The court held that the statement in Kercher went too far when the court in Kercher stated “there must always be an explanation for the delay”.
The decision of the trial judge was reversed and the wife had leave to commence her proceeding.
In late 1984 Asche SJ endeavoured to restore the Hall v Hall[21] criteria by holding that under s 44(3) the applicant must demonstrate –
a)first, the existence of a reasonable claim to be heard which must then be considered in the light of all the facts to determine whether the applicant would suffer hardship by the application being refused; and
b)that the court should exercise its discretion in the applicant’s favour.[22]
[21] (1979) 5 Fam LR 411.
[22]In the Marriage of Walker (1984) 9 Fam LR 983.
Asche SJ held that the time for assessing whether the applicant has a reasonable claim to be heard is the time for filing the application for leave. His Honour referred to the decisions in MacKenzie, Whitford, Frost, Carlon, Perkins and McDonald, stating Hall v Hall[23] was to be followed.
[23] (1979) 5 Fam LR 411.
It was fair to say the learning on point was unsettled and in a degree of fluidity.
On 4 December 1985 another differently constituted Full Court addressed an application under s 44 in In the Marriage of Leibinger.[24] It will be recalled that in earlier statements of full courts the test was expressed in terms of the resolution of two questions, the first being whether hardship would befall the applicant if leave were refused. The second was whether, in the exercise of the court’s discretion, the court should grant or refuse leave. That was the upshot of decisions such as Whitford and Hall. Determining the issue of hardship was raised squarely from the section itself. Yet in In the Marriage of Leibinger the question of hardship was not expressed as a primary issue to be resolved. Murray J relied on the implication that arose from Whitford to the following effect –
The words of the Full Court in In the Marriage of Whitford (1979) 4 Fam LR 754; [1979] FLC 90-612 at 78,146 are relevant here: “The requirement that the court must be satisfied that hardship would be caused if leave were not granted, implies that it must be made to appear to the court that the application would probably succeed if the substantive application were heard on the merits.”
[24] (1985) 11 Fam LR 33.
Murray J placed considerable store in the prejudice caused by the delay in commencing the proceeding. That was a curious position having regard to the observations in Carlon to the effect that inadequately explained delay will not of itself cause a s 44 application to fail.
Murray J relied on McDonald and Hall to hold that prejudice to the respondent was an important matter to be considered by the court in deciding whether or not to exercise the discretion to grant leave once the court was satisfied that the applicant would suffer hardship if leave were not given. Murray J applied the conception of prejudice formulated by Nygh J in In the Marriage of Frost & Nicholson as follows –
I agree with Nygh J when he says in In the Marriage of Frost and Nicholson (1981) 7 Fam LN No 9; [1981] FLC at 76,425: “Prejudice here means 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.”
In separate reasons Fogarty J agreed with Murray J adding that it was necessary to take into account the quality of the proposed claims. Relying on the observations in Walker and Perkins, Fogarty J held that on an application under s 44 it was necessary to demonstrate that the claim had a reasonable chance of being successful to some worthwhile extent. Forgarty J concluded that the applicant’s material “was markedly deficient” (his Honour’s words).
Emery J agreed with both Murray J as well as with Fogarty J adding nothing. The appeal was allowed.
From that review of the key authorities on point, it is possible to distil certain statements of principle, although I hasten to add that the authorities do not speak with one voice.
Section 44 uses the word “hardship” so the court’s primary task is to assess whether the applicant or a child of the relationship will suffer hardship if the application is refused. Several authorities[25] speak of an applicant establishing a prima facie case for hardship. Several other authorities speak of the requirement for an applicant to demonstrate that he or she has a reasonable claim to some interest in the property and that the applicant would suffer substantial detriment if not permitted to litigate that claim.[26] In Leibinger, Emery J spoke of the “quality of the proposed claim”. In Swallow, the court said any attempt to classify hardship would not be proper.
[25] Those include Swallow, McDonald, Whitford, Perkins, Frost and Leibinger.
[26] In that category are Hall and Walker.
It seemed to me that the “hardship” to be shown by an applicant is also the subject of differing statements. In Whitford the hardship was said to be akin to “hardness, severity, privation, that which is hard to bear or a substantial detriment”. In Hall and MacKenzie the word was said to mean “substantial detriment”.
The authorities seem to be entirely unsettled when the question of the need to account for delay is addressed. Some authorities regard delay in the bringing of the application and an adequate explanation for any delay as merely being part of the discretionary considerations that must be considered assuming hardship is proved. In that category are cases such as Shedden v Shedden, Whitford and In the Marriage of Walker.[27] Other cases such as Carlon, Althaus, In the Marriage of Howard[28] and Leibinger have held that the rigidity of requiring delay to be explained goes too far. Yet an undeniable body of authority (and to my mind the overwhelming preponderance of the authority) states that an applicant under s 44 is required to provide an adequate explanation for any delay. Cases in that category include Swallow, McDonald, MacKenzie, Perkins, Hall and Frost. Other authorities have focused on the prejudice caused to the respondent to the application.
[27] (1984) 9 Fam LR 983.
[28] (1979) 8 Fam LR 178.
In this case the trustee was critical of the applicant’s delay in bringing this application. Mr Thompson quite properly invoked the maxim vigilantibus et nom dormientibus lex succurrit calling in the House of Lords decision in Board of Trade v Cayzer, Irvine & Co Ltd.[29] Mr Thompson also argued that a cause of action should be brought within a reasonable period of time after the matters giving rise to the cause of action have occurred. Aside from the fact that a claim under s 79 of the Family Law Act may not be correctly classified as a cause of action, nevertheless the point raised by Mr Thompson is deeply embedded in Anglo-Australian jurisprudence of which the statement by Lord Goddard CJ in Jones v Bellgrove Properties Ltd[30] is but one illustration.
[29] [1927] AC 610, 628.
[30] [1949] 2 KB 700.
Section 44 requires an examination of the hardship likely to befall the applicant unless her application for leave to commence a s 79 application is granted. Accepting that, she is required to show “substantial detriment”.
The authorities surveyed above include cases in the category of older cases, many of which were forged in the infancy of the Family Law Act. One relatively recent Full Court authority and a very recent single judge authority have considered s 44. To them I now turn.
The Full Court’s decision in Sharp v Sharp[31] involved facts loosely analogous to those with which I was concerned in this case. There, the parties married in 1982, divorced in 2004 and in 2005 the husband was declared bankrupt. His bankruptcy was discharged in 2008 and in 2009 he filed an application for property adjustment under s 79 despite the time for bringing that application having expired in February 2005. A magistrate granted leave out of time. The wife appealed. The appeal was allowed with the consequence that the leave granted by the magistrate was overturned. It is utile to examine the court’s reasons in a little detail. While all agreed in the result, Young J delivered separate reasons to those of May and Ainslie-Wallace JJ. A large number of the Full Court decisions surveyed above were addressed by the plurality and having regard to the manner in which those authorities pointed in different directions on key criteria under s 44, it was an ambitious statement (and probably a tendentious one) for the plurality to say –
The principles concerning applications for leave to commence an action out of time are well-known.[32]
[31] (2011) 50 Fam LR 567.
[32] (2011) 50 Fam LR 567, 569 (at [12]).
They were very far from that.
The plurality said there was nothing to suggest that the statement of law from Brisbane South Regional Health Authority v Taylor[33] was not entirely applicable to a consideration of s 44. While the plurality did not say as much, by referring to McHugh J’s statement in Brisbane South Regional Health Authority v Taylor the plurality must be taken to have relied on the line of authority emanating from the observations of Lord Plumer MR in Cholmondeley v Clinton[34] where his Lordship held as follows –
The statute is founded upon the wisest policy, and is consonant to the municipal law of every country. It stands upon the general principle of public utility … The public have a great interest, in having a known limit fixed by law to litigation, for the quiet of the community, and that there may be a certain fixed period, after which the possessor may know that his title and right cannot be called in question. It is better that the negligent owner, who has omitted to assert his right within the prescribed period, should lose his right, than that an opening should be given to interminable litigation, exposing parties to be harassed by stale demands, after the witnesses of the facts are dead, and the evidence of the title lost. The individual hardship will, upon the whole, be less, by withholding from one who has slept upon his right, and never yet possessed it, than to take away from the other what he has long been allowed to consider as his own, and on the faith of which, the plans in life, habits and expenses of himself and his family may have been (as it is alleged in the present instance they were) unalterably formed and established.
[33] (1996) 186 CLR 541.
[34] [1820] 37 ER 527.
That statement was later emphasised by Lord Hailsham in R v Lawrence[35] where his Lordship held –
Where there is delay the whole quality of justice deteriorates.
[35] [1982] AC 510.
In Professor Dal Pont’s publication Law of Limitation[36] he explained that the elapsing of time increased the likelihood that the relevant evidence is lost or its integrity otherwise compromised. Professor Dal Pont said the following –
A court, when presented with incomplete or potentially inaccurate evidence, can hardly be confident in meeting justice as between the litigants. This cannot, in turn, other than impact adversely upon public confidence in the broader administration of justice.
[36] G. E. Dal Pont, Law of Limitation (LexisNexis Butterworths Australia, 2016).
There is nothing new in the notion that the object of any time limitation stipulation is to fix a point, the exact position of which should be perfectly clear rather than one which should, abstractedly considered, be the most just.[37]
[37] Baron Parke held as much in Owen v De Beauvoir [1847] 153 ER 1307.
Yet the statement of principle in Brisbane South Regional Health Authority v Taylor about the policy underlying the imposition of a limitation period (relevantly here, one year to commence a s 79 proceeding after the marriage dissolution) within which to prosecute a civil claim is not to be confused with the criteria for the grant of an extension of that time limit.
Returning to the reasons of the plurality in Sharp v Sharp, the judges applied the reasoning of Whitford v Whitford holding that “hardship” was constituted by the consequences that flow from the loss of the right to commence a proceeding (relevantly, a s 79 proceeding). In an appropriate case that may even amount to the loss of the right to pursue something which is of comparatively small monetary value. The plurality in Sharp held that the magistrate erred by not undertaking the necessary exercise of attempting to assess the probable outcome of the husband’s substantive case if leave were to be granted and the likely costs of that substantive claim. To my mind, that is another way of stating that the magistrate failed to adequately assess the merits of the applicant’s case and the prospects of success of the applicant’s claim, a notion deeply embedded in applications for an extension of time.[38]
[38] Palata Investments Ltd v Burt & Sinfield Ltd [1985] 2 All ER 517, 520 and Salido v Nominal Defendant (1993) 32 NSWLR 524, 538.
Young J reviewed most of the authorities on hardship as I have examined them above. His Honour distilled them to the following, a view with which I respectfully agree –
In my opinion, in undertaking a determination of whether the requisite hardship will be occasioned to the applicant under s 44(4)(a) what is required by the court is an assessment of the asserted hardship, and in view of that hardship, a determination of whether the applicant has demonstrated that there is a reasonable claim to be heard. If the applicant has established that there is a reasonable claim to be heard and has demonstrated that she or he would suffer hardship in the form of a substantial detriment as a consequence of the loss of the right to institute the proceedings, then the statutory precondition in s 44(4)(a) will be satisfied and the court may then consider whether in all the circumstances leave should be granted to allow the application under s 44(3) of the Act.
Young J introduced, quite properly, a consideration of matters prescribed by the High Court in Gallo v Dawson,[39] a proposition no other judge in s 44 applications had addressed. While it is true that the decision in Gallo v Dawson concerned an application to enlarge time limits in a notice of appeal in an existing High Court case (very different to the facts of this case) nevertheless McHugh J made certain salient observations. His Honour held as follows –
a)citing Hughes v National Trustees Executors & Agency Co of Australasia Ltd,[40] the discretion to extend time is given for the sole purpose of enabling the court to do justice between the parties;
b)to determine whether any time limitation will work an injustice, it is necessary to have regard to the history of the proceeding, the conduct of the parties, the nature of the litigation and the consequences for the parties of the grant or refusal of the application for extension of time; and
c)where the proposed appeal cannot succeed, the application to extend time should be refused.
[39] (1990) 64 ALJR 458.
[40] [1978] VR 257.
In the result, the appeal was allowed and the husband’s s 44 application was dismissed.
In January of this year, Gill J was concerned with a s 44 application in Lagioia & Rapino.[41] There the wife sought leave under s 44 following the parties’ separation in 2008, their divorce in 2012, the husband’s commencement of a s 79 case in the Federal Circuit Court in 2012, his discontinuance of that proceeding in 2014 and the wife’s commencement of her own s 44(3) application in this court in 2017. Before Gill J the husband disputed that the wife had a prima facie reasonable case and he asserted that she had not presented a reasonable explanation for delay. His Honour expressed the test in the following terms –
13.That is, a determination of hardship is what enlivens the discretion to grant leave. The discretion can only be exercised after a determination of hardship is made.
[41] [2020] FamCA 11.
With that I respectfully agree.
His Honour addressed whether the wife had demonstrated the existence of a prima facie reasonable case of hardship by concluding she had not. Three relevant paragraphs of his Honour’s reasons reveal his Honour’s path of reasoning. They were as follows –
31.At its best for the Wife, the evidence sustains that there was a net pool at the time of separation, from which each party received benefit. On the Wife’s case the Husband has had the benefit of approximately 55 per cent of the separation pool. That, however, does not answer the current pool position.
32.The Wife alleges that the Husband has not made full and frank disclosure. If that allegation is accepted it still does not establish, even on a prima facie basis, that there are existing assets regarding which an adjustment could be justified. Absent an identification of a pool of existing assets being available for distribution the Wife does not meet the first hurdle set out in Stanford.[42]
33.Establishing hardship requires that the Wife demonstrate that she would be denied a claim that is worth pursuing. The Wife has not established that she has a reasonable claim to be heard. Absent establishing this aspect, she has not established, despite her evidence as to dire current financial circumstances, that she would suffer hardship should leave not be granted.
[42] (2012) 247 CLR 108.
Gill J dismissed her claim.
I must examine whether the applicant (the wife) in this case has made good her contentions in that regard. As has already been pointed out, the applicant’s evidence about matters connected to hardship was perfunctory, to say the least. In some respects it was difficult to follow the applicant’s version of events.

The wife’s submissions in this case

On behalf of the wife, Mr Fary of counsel identified that two proceedings were before the court, namely –
a)the trustee’s application which was transferred to this court by order of O’Bryan J made on 12 February 2020; and
b)the wife’s application to extend the time within which she may commence her application under s 79 of the Family Law Act.
The mainstay of Mr Fary’s submissions concerned the wife’s extension of time application. In turn, Mr Fary placed considerable store on his contentions concerning s 120 of the Bankruptcy Act, as considered by the Full Court of the Federal Court in Official Trustee in Bankruptcy v Lopatinsky.[43] Mr Fary argued that either the wife should be granted an extension of time within which to commence her property alteration claim under s 79 of the Family Law Act or her application for an extension of time should be adjourned for hearing and determination with the trustee’s application (or immediately following it) with evidence in one being evidence in the other.
[43] (2003) 30 Fam LR 499.
Before addressing the wife’s case in detail, it is utile to say something generally about the inter-relationship between a spouse’s claim under s 79 of the Family Law Act and a claim by a trustee-in-bankruptcy or creditors generally and the correct way a court should proceed.
Several important decisions of the Full Court of the Family Court have addressed the issue. In In the Marriage of Biltoft[44] the court[45] held that where it is not possible for a judge to quantify the debt owing to others the court must ascertain the value of the property of the parties by deducting their total liabilities including unsecured liabilities from the gross value of their assets. That was the course adopted in In the Marriage of Prince[46] and In the Marriage of Rowell; Deputy Commissioner of Taxation (Intervener).[47] Where an unsecured liability is vague or uncertain, unlikely to be enforced or unreasonably incurred, it is competent for the court to determine that such an amount is not to be taken into account, as was held in In the Marriage of Petersens.[48] Relying on the High Court’s decision in Ascot Investments Pty Ltd v Harper,[49] the Full Court in Biltoft held that the court must take the property of a party to the marriage as it finds it and that the Family Court cannot ignore the interests of third parties in the property.
[44] (1995) 19 Fam LR 82.
[45] Nicholson CJ, Ellis & Buckley JJ.
[46] (1984) 9 Fam LR 481.
[47] (1989) 96 FLR 449.
[48] (1981) 7 Fam LR 402.
[49] (1981) 148 CLR 337.

Taken in aggregate, Lindgren J’s distillation of the import of s 120 raised issues that are complicated to say the least. In my view it ill-behoves a judge dealing with an interlocutory leave application to foreclose on the possibility of ventilating those legal complexities as they apply to the facts of this case by a perfunctory refusal of leave.

The significance of the informal arrangement

The fact that in this case the parties entered into an informal arrangement to divide their property does not preclude either party (relevantly here, the wife) from applying for orders under s 79 of the Act. That was the upshot of the decision of the Full Court of the Family Court in In the Marriage of Woodland & Todd.[61] There, the court held that the earlier agreement should be considered but its provisions only given effect if they coincide with an order which is just and equitable at the time of hearing under s 79. The court also held that in determining the s 79 application in circumstances where there has been an earlier agreement, it will often be necessary to examine the value of the parties’ assets at the date of the agreement, what were their various contributions to that time and what might have been appropriate s 75(2) adjustments.
[61] (2005) 33 Fam LR 179.
Mr Fary advanced in paragraph 20 of his written submissions a collection of propositions he styled “difficulty confronting the wife.” It is useful to record them, lengthy as they may be –
(a)The wife already has an (informal) property settlement with the husband under which the husband's interest in the property was transferred to her in exchange for her not pursuing rights under s 79 of the FLA.
(b)In bankruptcy, there are doubts whether the informal property settlement and the rights given under it would be recognised as consideration for the purposes of s 120 and 121 of the Act 13 - in particular, there is a real question as to whether this aspect of the settlement would constitute “market value consideration”.
(c)The difficulty here is that to the extent that the limitation operates, the informal property settlement is binding as between the husband and the wife - because it would have been too late for them to seek orders under s 79 of the FLA. In other words, they were stuck with the status quo.
(d)However, the trustee by electing to avoid the transfer is seeking to upset the status quo created by the informal property settlement.
(e)Further, the trustee's action does not properly recognise the value of the rights that were given up by the wife in entering into the informal property settlement. That is because, the types of matters that the court could take into account under s 79 of the FLA are significantly broader than those recognised under the Bankruptcy Act as “consideration”.
(f)If the court were to accept that the transfers (pursuant to the informal property settlement) had been avoided by the trustee, then the property the subject of the avoidance would become part of the “vested bankruptcy property” for the purposes of s 79 of the FLA.
(g)In a typical case involving the bankruptcy of a spouse, any inequity arising from an avoidance of a transfer could be rectified by the court making such orders under s 79 of the FLA as are “just and equitable”.
(h)The problem here is that because the trustee's decision to avoid the transfer occurred more than 12 months after the parties' divorce, it is too late, without an extension, for the wife to seek an adjustment.
(i)The argument here that there should be an adjustment against the trustee is made stronger by the existence of the informal property settlement. In Woodland v Todd, the court recognised that an earlier agreement was relevant for the purposes of s 75(2) of the FLA.
(j)If an extension of time were not granted, the court would be limited in the matters that it could consider for the purposes of resolution of the competing rights of the wife and the trustee.
(k)Consistently with the intention of the 2015 amendments, the grant of an extension will enable all relevant matters to be considered by the court enabling it to make orders that are “just and equitable”.
I agree.

Assessing the wife’s case

Mr Fary contended that the wife had a prima facie claim worth pursuing with a “real probability of success.” He said the wife will suffer hardship unless she has leave to bring the s 79 application. Mr Fary said that by advancing her s 79 application the wife will be able to put before the court –
a)the details of the informal property settlement;
b)rights she gave up by her entry into the informal property settlement; and
c)rights conferred upon the husband by their entry into the informal property settlement.
It must be said that the details given by the wife about the informal property settlement were not particularly extensive. Her narration of contributions was also bereft of the searching details a s 79 case ordinarily entails, even recognising that her affidavit filed in support of her extension of time application was intended for an interlocutory application and not for a final hearing. It must also be said that the informal arrangement into which the husband and wife entered appeared, at least to them at the time, to have been mutually beneficial as they freely entered into it. Yet in the absence of greater particularity about their respective contributions it is not easy to say whether that arrangement was just and equitable. Of course, it must be recognised that it is far from infrequent for married couples to separate then divorce and for them to privately alter their financial affairs without legal assistance or sanction from the Family Court of Australia or the Federal Circuit Court of Australia. The reasons for couples doing that are many and varied but their reasons usually involve their wish to avoid the legal costs attendant upon a more formal court sanctioned property settlement. Informal property settlements are valid. But they are not immune from later scrutiny where one party, as here, contends that the arrangement is not just and equitable in accordance with s 79.
In this case the parties’ informal property alteration involved amounts that by agreement were paid to the wife representing a little more than an equal half division of property. The wife said in effect that the parties reached that result to better reflect the disparity of their respective financial contributions, especially as the wife was employed throughout the marriage while the husband was not and the wife paid for most of the family outgoings during the marriage. To my way of thinking, that lay reasoning correctly accounted for an unequal division of property in the manner undertaken by the parties pursuant to their informal agreement.
Yet the trustee now takes the view that the sums paid to the wife beyond an equal property division represent amounts that must be unravelled. True it is that a bankrupt’s unsecured creditors gain no priority in the division of property part of which involved a recognition that the wife was to receive more than half for the simple reason that she, almost single-handedly, funded the family’s lifestyle. In my view, it would occasion to the wife very considerable hardship if she were not permitted to agitate her s 79 claim while concurrently, the trustee maintained his claim for the avoidance of the two transactions that the husband’s and wife’s untutored reasoning had the effect of equalising the property alteration between the parties, albeit one undertaken informally. In my view it would be unjust and inequitable to prevent the wife’s s 79 application from proceeding yet at the same time allowing the trustee’s claim to go forward for payment of sums allegedly due to the trustee under the Bankruptcy Act.
In my view the wife has demonstrated hardship for the purposes of s 44(3) of the Family Law Act. She has a prima facie case that cannot be said to be unarguable. Her claim to a greater division of property based on her greater amount of contributions during the marriage seems at least on this interlocutory application to be maintainable in which the evidence is untested. Put differently, I am unable to dismiss her claim for being fanciful or improbable. It is maintainable and it warrants investigation.
In accordance with the authorities surveyed above, it next became necessary to address discretionary issues that might tell in favour of or against the grant of leave under s 44(3). Self-evidently, the most major discretionary issue in this case is the wife’s delay in commencing this proceeding for s 79 orders. Her delay impacts on the orderly conduct of the trustee’s administration of the husband’s bankrupt estate. It is not inconceivable that this case might take one year to be heard at trial and over that intervening time, the husband’s creditors will be further prolonged in achieving any ratable distribution of available funds. That said, in Richardson v Richardson[62] the trial judge granted leave to the applicant to commence a proceeding for property division 16 years after separation and the Full Court dismissed an appeal from the trial judge’s decision.
[62] [2008] FamCAFC 107.
On closer examination, it seemed to me that any such adverse impact on the trustee was more apparent than real. The trustee has his own proceeding on foot in which he seeks a very substantial sum from the wife. His claim for that sum should not be heard in isolation from the wife’s claim under s 79. It may transpire, and at this stage the point cannot be expressed with any certainty whatsoever, that the trustee fails to make out his contentions against the wife under s 120 or s 121 of the Bankruptcy Act. In that eventuality the trustee’s case will fall to be determined under s 79 of the Family Law Act. As the trustee’s case under the Bankruptcy Act has been ordered to be heard with this proceeding in the Family Court, the two competing claims will be tried at the same time. Naturally, if I were to conclude that the wife’s delay in commencing this s 44 application for an extension of time was an insuperable obstacle, then that would work the injustice of stymying her claim yet allowing the trustee’s claim to go forward. In my view, that would be wholly antithetical to the administration of justice.
Her reasons for her delay in commencing this application were persuasive yet far from compelling. In essence, she said that when she sought legal advice in response to the trustee’s letter of demand for payment of a large sum, she was advised to bring this application for an extension of time. That seemed perfectly legitimate even though several years had elapsed since the parties’ divorce and the transactions effected pursuant to the informal property settlement. Looked at from the wife’s viewpoint, it seemed that she was conducting her life on the basis that she and the bankrupt had resolved their property matters and only when the trustee made a claim against her did she reassess her circumstances. I can see nothing nefarious in that. Nor can I detect any want of diligence nor conduct amounting to sitting on her rights or, as the trustee put it in Latin vigilantibus et nom dormientibus lex succurrit.
For those reasons hardship has been made out by the wife. I do not consider that I should exercise the discretion conferred by s 44(3) by refusing the wife’s application.
I extend the date for commencing this proceeding to 20 December 2019.
The trustee sought alternative relief in the nature of an injunction to prevent dissipation of assets by the wife. After an exchange with counsel it became apparent that no formal order was required and an assurance but not strictly an undertaken, by given on behalf of the wife in terms of the alternative relief sought by the trustee.
I direct that the parties bring in minutes within seven days that provide for ongoing case management having regard to the fact that this case is now in my docket.

I certify that the preceding one hundred and forty-eight (148) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Wilson delivered on 18 June 2020.

Associate:

Date: 18 June 2020