Petresca and Petresca

FAMILY COURT OF AUSTRALIA

PETRESCA & PETRESCA

[2008] FamCA 920

FAMILY LAW – PROPERTY – Husband bankrupt – Trustee in bankruptcy nominal role in proceedings – Section 44(3) application where parties divorced in 1983 but reconciled shortly after – Hardship question considered – Husband’s bankruptcy and failure to file material is a ground for permitting wife to proceed on undefended basis

Family Law Act 1975 (Cth)

Australian Securities Commission v MacLeod (1994) 130 ALR 717
Brown and Brown [2004] FamCA 1067
Keith and Soukis [2007] FamCA 1017
State of Queensland v JL Holdings 189 CLR 146
Tate v Tate (2000) FLC 93-047

APPLICANT:

MS PETRESCA

RESPONDENT:

MR PETRESCA

INTERVENOR:

OFFICIAL TRUSTEE IN BANKRUPTCY

FILE NUMBER:

MLC

872

2008

DATE DELIVERED:

31 OCTOBER 2008

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

THE HONOURABLE JUSTICE CRONIN

HEARING DATE:

31 OCTOBER 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT:

MR SPICER

SOLICITOR FOR THE APPLICANT:

TIA FORBES & HENRY

COUNSEL FOR THE RESPONDENT:

IN PERSON

SOLICITOR FOR THE RESPONDENT:

COUNSEL FOR THE INTERVENOR:

MS ELSUN

SOLICITOR FOR THE INTERVENOR:

FORTE FAMILY LAWYERS

Orders

That the wife have leave to proceed on an undefended basis subject to the limitations otherwise referred to in these orders.
That pursuant to s 44(3) of the Family Law Act 1975 (Cth) (“the Act”), the wife have leave to proceed with her application out of time.
That the property situated at M being the land described in Certificate of Title Volume … Folio … be sold by public auction altogether out of court.
That the property situated at O and known as the O Business being the land described in Certificate of Title Volume … Folio … be sold by public auction wholly out of court and until the annulment of the husband’s bankruptcy, the second respondent be solely entitled to all or any occupation fees or like payments in respect of the said property.
That the wife have sole responsibility for the implementation of the two foregoing orders on the basis that she consult with the official trustee or the trustee of the husband’s bankrupt estate with regards to the reserve price and terms of sale of each property.
That paragraphs 1-5 of the orders made on 7 August 2008 be discharged.
That after the payment of reasonable selling costs, the proceeds of sale of whichever property sells and settles first be applied as follows:
(a)     to discharge the mortgage, if any, attached to that particular property;
(b)     to pay all debts, fees, interest, expenses and costs of the bankruptcy and annulment of the husband;
(c)     the balance, in the event that the O Business sells and settles first, be paid towards the mortgage encumbering the property at M being the mortgages to Westpac Bank registered number … and …; and
(d)     that the balance (if any) be held in interest bearing account on behalf of the parties by the solicitor for the wife.
If the sale of the first property, whichever it is, is inadequate to discharge all of the payments referred to in the foregoing order, the proceeds of sale of the second property be applied to discharge those payments.
That the husband be and is hereby restrained from:
(a)    contacting the estate agents retained to sell the property at M or the O Business pursuant to these orders;
(b)    attending at or being within 100 metres of either of those said properties; and
(c)    attending at or interfering with the auctions or sale of either of the said properties.
Neither the husband or the wife encumber the said properties without order of this court.
That the official trustee in bankruptcy and/or the trustee of the husband’s bankrupt estate be excused from further attendance at court hearings save for when any hearing may affect the trustee’s interests or if the wife seeks to amend her application for final orders or to vary these orders.
That pursuant to s 106A of the Act, the Registrar of this Court is appointed for the purposes of signing any deed or instrument required to be executed by the husband in the name of the husband and to do all acts and things necessary to give validity and operation to that deed or instrument.
That for the purposes of paragraph 12 of these orders, the Registrar shall be satisfied of the requirement to sign such deed or instrument by the production of an affidavit sworn by the legal practitioner for the wife or the trustee of the bankrupt estate of the husband setting out the document required for execution.
That the wife and the trustee of the husband’s bankrupt estate have general liberty to apply.
That the wife advise the husband in writing as to any sale made pursuant to these orders by ordinary post to him C/- T Street, R or the address for the service in any Notice of Address for Service subsequently filed by him in these proceedings.
That within 14 days of service of notification pursuant to paragraph 15 of these orders of sales pursuant to these orders, the husband may file and serve:
(a)a Notice of Address for Service;
(b)a response to the wife’s amended application for final orders filed 20 October 2008 including an application to vary paragraph 1 of these orders if he so choses or is so advised;
(c)any affidavit material upon which he intends to rely; and
(d)a financial statement complying with Order 13 of the Family Law Rules 2004.
That all questions of costs be reserved.
That the wife’s amended application for final orders be adjourned part-heard before me on a date to be fixed as soon as practicable after the pool of assets has been crystallised by the said sales.
That a copy of these orders be sent by my Associate to the husband at T Street, R.
That my reasons this day be placed upon the file and be made available to the parties, including the husband by post to T Street, R.
That pending the completion of the sale of the O Business, the wife have the sole right to occupy the property at M until the settlement of the sale of that property and each party hold their respective interests in the real properties upon trust pursuant to these orders.
That the application of the wife seeking interim orders filed on 20 October 2008 be otherwise dismissed.

IT IS CERTIFIED:

That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel and solicitor appearing as counsel to attend.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 872 of 2008

MS PETRESCA

Applicant

And

MR PETRESCA

Respondent

REASONS FOR JUDGMENT

These are my reasons in a modestly simple property application only made complex by the bankruptcy of the husband and his personal approach to the proceedings.
I am delivering these reasons on the basis that there is some urgency about the case which I have started and which is now part-heard.
For reasons which I shall endeavour to set out, I propose pursuant to s 79(5) of the Family Law Act 1975 (Cth) (“the Act”) to adjourn the proceedings to another date so that the financial picture will be clearer.
The urgency in this case arises because creditors are pressing and a failure to act will give rise to more anxiety for the parties. Ironically, the husband has adopted the view that what the wife is doing and by implication the Court, has drastic financial consequences for her. I disagree. Even if that was so, she is pursuing an end to the litigation which is something that the husband is not doing. To that extent therefore, the husband is the master of his own demise.
The wife is a 58 year old health worker. The husband is 58 years of age as well. I am not sure what his occupation is nor do I know what his financial position is.
The parties married in January 1978 and divorced on 3 January 1983. The jurisdiction under Part VIII of the Act therefore ended sometime around 1984. However, the parties reconciled in 1983 and lived together until 24 June 2006.
The wife’s evidence was that the parties sold their respective real properties in 1983 or thereabouts and purchased a home at B.
Thereafter, followed a variety of financial transactions including an incorporation of a company which clearly showed a joint venture approach to their relationship. The only evidence is that they resumed their life together in 1983 as if they had not been divorced.
After separation in 2006, the husband was made bankrupt. His estate was sequestrated on 10 December 2007 and he remains an undischarged bankrupt. That brings to these proceedings, the trustee of his bankrupt estate.
On 1 February 2008, the wife filed an application for final orders and she named the husband and J Pty Ltd (in liquidation) as the respondents. She sought orders that the husband forthwith reduce the mortgage on the former matrimonial home to the sum of $150,000 and then transfer that property to her. She also sought that the husband transfer his rights to her in the O Business.
The difficulty with pursuing those orders in early 2008 was that the husband was already bankrupt.
The husband was served personally with the wife’s documents on 30 January 2008. He signed an acknowledgement for the receipt of those documents.
On 21 February 2008, Carter J adjourned the proceedings to 5 March. The husband did not attend before Carter J. Her Honour noted a letter from the wife’s solicitor asking for the adjournment because the husband had advised that he had been declared bankrupt.
On 3 March 2008, a Notice of Address for Service was filed by a legal practitioner acting for the official trustee of the estate of the husband.
On 5 March 2008, the matter came before Dessau J. The husband attended on that day without legal representation. The solicitor appeared for the husband’s trustee in bankruptcy. Orders were made joining the trustee and removing J Pty Ltd (in liquidation) on the basis that that entity was no longer necessary to be a party to the proceedings.
Importantly, for my purposes, her Honour ordered:
…
3.   That the husband shall deliver up to the Trustee within 7 days keys to all parts of the property known as the [O Business] situated at [O] (“the [business]”).
4.   That in the event of the husband failing to comply with order 3 then the Trustee shall be entitled to immediately attend to the changing of the [O Business’s] locks by a locksmith.
…
6.   That the husband within 7 days shall complete his statement of affairs as required by the Trustee and provide same to the Trustee and a copy to the wife’s solicitors.
…
8.   That the husband shall file and serve an address for service within 24 hours.
9.   That the parties shall attend a Conciliation conference at 2.15pm on 14 April 2008.
The husband did not comply with paragraph 8 of her Honour’s orders.
On 16 June 2008, the conciliation conference so ordered was conducted by Registrar Lethbridge. Notwithstanding that the husband had not filed any material and also attended the hearing before Dessau J, he again attended personally at the conciliation conference. The trustee of his bankrupt estate was represented as was the wife.
On that day, the Registrar ordered:
1.The further hearing of Form 1 and Form 2 Applications filed by the Applicant Wife on 1 February 2008 be adjourned to the Judicial Duty List on 23 July 2008 at 10 am for a hearing on the issue of the sale of matrimonial property including the [O Business].
2.The Respondent Husband appear and/or be represented on the adjourned hearing date.
…
4.On or before 4 pm 4 July 2008, the Respondent Husband file and serve a Response to an Application for Final Orders and a Response to an application in a Case setting out any Orders sought by him, together with a Form 13 Financial Statement.
5. In the event that the Respondent Husband does not comply with Order 2 or Order 4 of these Orders, the Applicant Wife have liberty to apply to have her Applications heard undefended.
The husband did not comply with Order 4 of the Registrar’s order.
The matter then came back on for hearing on 23 July 2008 before Mushin J. Again, the husband attended in person. His Honour ordered that the case be adjourned part-heard. Again, it is important to point out the orders that his Honour made. He ordered:
…
2.   The husband file and serve any response to any application presently before the Court together with a Financial Statement and any affidavit in support thereof no later than 4:00pm on 5 August 2008.
3.   The husband attend Court at the said adjourned hearing either with or without legal representation.
4.   In the event that the husband fails to comply with any part of paragraphs 2 or 3 of this order any application by the wife or the trustee proceed on an undefended basis subject to the discretion of the Trial Judge with regard to the right of the husband to make any submission to the Court and cross-examine any witness, if any.
The husband did not comply with the orders of Mushin J.
On 7 August 2008 again before Mushin J, the parties attended. The husband appeared without legal representation.
On 7 August 2008, his Honour ordered inter alia:
1.The property situated and known as [O Business], [at O] in the State of Victoria more particularly described in Certificate of Title Volume […] Folio […] (“the [O Business]”) be forthwith sold by the Official Trustee in Bankruptcy of the estate of the husband wholly out of Court.
2.The said trustee be and is hereby solely authorised to sell the said [O Business] on such terms and conditions including whether by private treaty or public auction, reserved price, terms and conditions of sale and choice of real estate agent and solicitor as he may decide in his sole discretion.
…
5.   The husband be and is hereby restrained by himself, his servants and agents as follows:
a.     from contacting any selling agent engaged to sell the [O Business];
b.     from attending at or within 100 metres of the [O Business];
c.     from attending at or interfering with any auction or sale of the [O Business]; and
d.     from contacting or attempting to contact any prospective purchaser of the [O Business].
6.The further hearing of all applications be otherwise adjourned for hearing before Justice Mushin at 10:00am on Wednesday 24^th September 2008.
The husband up to August 2008, had been given an enormous indulgence because he had been heard by the Court and participated in a conciliation conference without filing even a Notice of Address for Service.
I am now told that despite his Honour’s order for the sale of the O Business, nothing has happened.
On 22 September 2008, the proceedings were adjourned on the following basis as set out in the letter dated 22 September 2008 from the solicitors acting for the trustee of the husband’s bankrupt estate. That letter reads:
This matter is listed for hearing on 24 September 2008 at 10am in the Family Court. We seek that the hearing be adjourned for a period of 4 weeks. On 7 August 2008, Orders were made for the [O Business] to be sold by the Official Trustee in Bankruptcy. This has been delayed in the expectation that [the husband] would annul his bankruptcy. [The husband] has not annulled his bankruptcy and the Official Trustee in Bankruptcy is now taking steps to sell the [O Business]. It seems premature to report back to the Court at this stage.
This letter has been signed by the solicitor for the Applicant wife. [The husband] is the bankrupt and has not filed any documents in these proceedings. [The husband] has consented to the adjournment of the hearing on 24 September 2008. A copy of [the husband’s] email is enclosed.
On 22 October 2008, Mushin J had the case before him again. The husband attended in person. At that hearing, the applications were referred to me for fixing for hearing and Mushin J disqualified himself. As with each previous hearing, the husband did not file any material.
On 31 October 2008, the matter came before me. Mr Spicer of counsel appeared for the wife and Ms Elsun appeared as the solicitor for the trustee of the husband’s bankrupt estate. The husband appeared in person. It is trite to say that the husband has still not complied with any orders of the Court for filing of material.
The wife sought to proceed with her application in a case filed 20 October 2008. In that application she sought:
1.That leave be granted pursuant to Section 44(3) of the Family Law Act 1975 (as amended) granting the Wife leave to file an application seeking orders pursuant to Sections 72 and 79 of the said Act out of time.
2.That this interim application be listed for hearing as a matter of urgency.
…
13.That the Wife’s application be heard undefended.
That same application sought a variety of orders including some variation of the orders made on 7 August 2008 for the sale of the property and I shall return to that below.
In essence therefore, the wife’s application was consistent with the previous orders of the Court that the wife had the opportunity if the husband remained without complying with the orders, to seek an undefended hearing.
Ms Elsun said that the trustee of the husband’s bankrupt estate neither opposed nor supported the wife’s application.
Notwithstanding that the husband had still not filed anything, I asked him what his position was. As with a number of other gratuitous comments he made during the hearing, he said of the wife’s application to proceed undefended that it was grossly unfair and that an injustice would be done if the application was to proceed. He acknowledged he had made “mistakes” but the lawyers had taken advantage of him. He said he would like to be heard. He said the wife had constantly told him that she was going to settle out of court and that the case was not going to court but each time, the lawyers kept bringing up documents that he did not understand and the matter was in court. He said he had not filed an affidavit because he didn’t want to publicly criticise the wife. He said it just destroyed things.
None of the statements to which I have just referred were on oath nor from any material that I could read, was there any foundation for such an assertion.
The husband went on to say that he was not a lawyer. In so far as it might be said that he was disadvantaged, I reject that. He has attended a number of hearings in the past with different judicial officers and I gave him a number of opportunities to explain to me today how he intended to resolve the problem having regard to the fact that he was bankrupt. The other remarks that must be made about what the husband was saying are that at no time did he address the issue of why he had not complied. I reject the suggestion that his statement about the wife tantalising him telling him that the case was going to be settled out of court whilst at the same time taking him to court, was a basis to ignore court orders. In addition, the husband told me that he had organised through a lawyer to get some finance that would ultimately annul his bankruptcy. He named the lawyer in court. He has had access to ample advice. He told me that he did not have money to be represented in the proceedings and that the lawyers wanted money up front to appear. In my view, that is not a basis to say that he has not had ample opportunity to understand what the proceedings are about.
Because the husband said to me that he had finance to “annul” his bankruptcy, I invited him to tell me about it. He said he had told the trustee of his bankrupt estate. Ms Elsun said that there was no perfected arrangement for any money to be so paid. There is already an affidavit on the file from an officer of the trustee organisation which makes clear that the husband was going to do things but nothing has happened.

I gave the husband an opportunity to produce some documentation to show that the finance that would annul his bankruptcy was readily available. I stood the case down for the husband to get the letter that he said he had and I asked him to provide it to Mr Spicer and Ms Elsun. When I returned to court, Mr Spicer said that the husband had not provided the letter notwithstanding that he actually had it. Ms Elsun said that the trustee had confirmed in the interim period that the finance was unlikely to occur. I asked the husband why he had not provided the letter to Mr Spicer and he said he wanted me to look at it first and decide whether the other parties should see it.
The husband was made bankrupt on 10 December 2007. There is no evidence that he has made any application to be discharged. There is no application that I am aware of that he can be discharged or that he has any intention in cooperating in these proceedings. Ms Elsun said that if the properties were sold as was anticipated, the trustee would receive sufficient funds to have the husband’s debts paid and he would then be discharged from bankruptcy. The husband seems to me to be doing everything to resist just that happening.
The clear implication of all of this is that the husband says that the bankruptcy is the wife’s fault and that he only wants to protect their assets because there will be nothing left. Yet, he does nothing to assist his own cause. His vitriolic emails which are annexed to the affidavit of the wife are nothing short of vindictive and disgraceful. His demeanour in the courtroom towards the wife was appalling. He gives me little confidence that he really is endeavouring to participate in these proceedings at all.
The first issue therefore is whether the wife’s application to proceed with the case on an undefended basis should be granted.
It is a very serious step to preclude someone from participating in legal proceedings. The power to proceed to hear a case on what is often described as an undefended hearing is set out in Rule 11.02(2)(c) of the Family Law Rules 2004 which provides:
If a party does not comply with these Rules, the Regulations or a procedural order, the court may amongst other things:
(c) determine the case as if it were undefended
An undefended hearing means literally that the respondent does not participate at all. In Tate v Tate (2000) FLC 93-047, the Full Court discussed the subject only briefly pointing out that as the appellant’s response had been struck out, from the court’s perspective there was no live issue between the applicant and the respondent. The Full Court referred to Australian Securities Commission v MacLeod (1994) 130 ALR 717 where Drummond J in the Federal Court said that there was no procedure for judgment being entered without the matter coming before that Court and evidence being called. As the Full Court observed, that applies in this Court but then went on to discuss what part the respondent could then play distinguishing the process of the Family Court from other courts of civil jurisdiction. The Full Court said:
The Family Court of Australia is all too frequently confronted with litigants who fail in their duties of full and frank (and prompt) disclosure of their financial affairs. Where such failure results in a Form 7A being struck out, as here, then that party ought have no further right to be heard without further order of the Court which is a matter for the judge in his or her discretion.
Accordingly it was open to the learned trial Judge to rule that the husband had no right to cross-examine and in the exercise of her discretion to refuse what may be loosely described as his application to do so.
The attainment of justice is the over-riding objective in each individual case. In the pursuit of such an objective the trial Judge was in this matter exceptionally well placed to weigh the issues and the factors affecting each litigant and make orders appropriate to the case before her. We believe she did so.
This was indeed an “exceptional” case. The forfeiture of the right to cross-examine or indeed to make submissions, flowed from the earlier order. We discern no error of law in what transpired and no miscarriage of her Honour’s discretion.
The important principle arising from Tate is that the recalcitrant litigant, as here, is seeking a discretionary order. The question for determination of that discretionary judgment is whether justice will be done.
In Brown and Brown [2004] FamCA 1067, O’Ryan J said:
What is very clear from the case law and the provisions of the 2004 Rules is that it is fundamental that the rules of Court and/or procedural orders must be obeyed and the Court should not be reticent about exercising the powers in r 11.02(2) in appropriate cases. In my view, it is not necessary that the circumstances be “exceptional”. No litigant, whether legally represented or not, should harbour any doubt that manipulation of the Court's processes, through disregard of and deliberate non-compliance with its orders and directions will attract other than the strongest measures from the Court.
The case law prior to the 2004 Rules was relatively harsh in responding to non-compliance. The new rules have adopted these case law principles as they place great importance on case management and the need to comply with court orders. As such, in my view, the new rules provide severe sanctions for non-compliance.
In State of Queensland v JL Holdings 189 CLR 146 the High Court had to deal with a problem where a litigant had been refused permission to amend pleadings. Dawson, Gaudron and McHugh JJ said:
Justice is the paramount consideration in determining an application such as the one in question. Save in so far as costs may be awarded against the party seeking the amendment, such an application is not the occasion for the punishment of a party for its mistake or for its delay in making the application. Case management, involving as it does the efficiency of the procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination of an issue between the parties.
Kirby J was more expansive saying:
No rigid pronouncements can be made of the way in which a discretion to permit an amendment of pleadings should be exercised. The Rules of Court affording the power to permit (or refuse) amendment are typically expressed in the widest language. This is to afford a large discretion to the judge to whom the amendment application is made. It would be unwise, and contrary to principle, to fetter such a discretion with rigid rules. Nevertheless, it may be helpful to direct the mind of the decision-maker to some of the considerations which have been found relevant.
The basic principle controlling the exercise of a power granted by statute, or under the authority of statute, is that the power must be exercised for the purpose for which it was afforded by the legislature. In the case of Rules of Court, it may be assumed that the power was granted out of the recognition of the traditional role of the judges to do justice according to law. In courts with a large inherent jurisdiction, this is part of the function of judges inherited, historically, from the royal prerogative. In courts created by legislation, it is implied in the very functions of a court and in the office of a judge.
…
In some jurisdictions, such changes have been sustained by special Rules of Court made under legislative authority. But even where special Rules have not been provided, alterations to the judicial role have been accommodated within the broad discretions conferred by Rules expressed in unqualified terms. Whilst such Rules may not be limited by particular language, they do imply parameters which must be understood by reference to the conventional requirements of justice.
…
Whilst taking all of the considerations relevant to the circumstances of the case into account, the judge must always be careful to retain that flexibility which is the hallmark of justice. New considerations for the exercise of judicial discretion in such cases have been identified in recent years. But the abiding judicial duty remains the same. A judge who ignores the modern imperatives of the efficient conduct of litigation may unconsciously work an injustice on one of the parties, or litigants generally, and on the public. But a judge who applies case management rules too rigidly may ignore the fallible world in which legal disputes arise and in which they must be resolved.
The Family Law Rules set out the power and the Full Court of this Court has made clear that the matter is a discretionary one enabling a judge to determine the extent of a litigant’s participation.
I find the husband has failed and continues to fail to comply with court orders. His failure to comply warrants the exercise of the power in Rule 11.02(2)(c) of the Family Law Rules 2004.
The question is whether that discretion should be exercised. Having regard to the husband’s conduct in court which was categorised as constant interruption and gratuitous comment without in any way addressing the question of why he had not filed documents or assisted in the process, this is a case where the husband should not be permitted to proceed other than in a limited respect.
The provisions of Part VIII of the Act require that a judge only make an order under s 79 if satisfied in all of the circumstances that it is just and equitable to make the order and in so making an order, to contemplate the matters set out in s 79(4) of the Act. Part of the consideration of the exercise of the discretion to allow a recalcitrant litigant to participate is whether justice can still be attained having regard to the obligations of the judge in s 79.
I intend to allow the husband to have a limited participation if he so wishes after the pool is crystallised. As I have already pointed out, he is a bankrupt.
The trustee in bankruptcy just wants the commercial realities realised. With the husband involved, that cannot happen. The husband is clearly obstructive to both the trustee of his own bankruptcy estate and the wife. Because of s 79(11) and (12), the husband’s role must be limited in these proceedings. Those provisions say:
(11)     If:
(a)      an application is made for an order under this section in proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them; and
(b)either of the following subparagraphs apply to a party to the marriage:
(i)when the application was made, the party was a bankrupt;
(ii)after the application was made but before it is finally determined, the party became a bankrupt; and
(c)the bankruptcy trustee applies to the court to be joined as a party to the proceedings; and
(d)      the court is satisfied that the interests of the bankrupt's creditors may be affected by the making of an order under this section in the proceedings;
the court must join the bankruptcy trustee as a party to the proceedings.
(12)     If a bankruptcy trustee is a party to property settlement proceedings, then, except with the leave of the court, the bankrupt party to the marriage is not entitled to make a submission to the court in connection with any vested bankruptcy property in relation to the bankrupt party.
The trustee of the husband’s bankrupt estate has adopted the position that if the proceeds of the sales are sufficient to annul the bankruptcy, they will withdraw from these proceedings. That however will leave very little property for division between the husband and the wife. It is the prejudice to that little pool of assets that causes me concern. The wife’s evidence is that the mortgagee creditors are pressing. She agreed to sell the former matrimonial home to try and address that problem.
In the circumstances of the exercise of my discretion, I see no prejudice to the husband in the wife proceeding on an undefended basis and I so ordered.
The next issue to arise is the fact that the wife is well and truly out of time to bring an application under Part VIII of the Act because of the provisions of s 44.
There is no opposition to the wife’s application albeit there is no consent from the trustee of the bankruptcy estate. The husband has no position having not filed any material. The fact that I have ordered that the proceedings can commence on an undefended basis however does not mean that the wife obtains orders by default. She still has to prove her case.
Section 44(3) says:
(3) Where, whether before or after the commencement of section 21 of the Family Law Amendment Act 1983 :
(a)a divorce order has taken effect; or
(b)a decree of nullity of marriage has been made;
proceedings of a kind referred to in paragraph (c), (caa), (ca) or (cb) of the definition of matrimonial cause in subsection 4(1) (not being proceedings under section 78 or 79A or proceedings seeking the discharge, suspension, revival or variation of an order previously made in proceedings with respect to the maintenance of a party) shall not be instituted, except by leave of the court in which the proceedings are to be instituted or with the consent of both of the parties to the marriage, after the expiration of 12 months after:
(c)in a case referred to in paragraph (a)--the date on which the divorce order took effect; or
(d)in a case referred to in paragraph (b)--the date of the making of the decree.
The court may grant such leave at any time, even if the proceedings have already been instituted.
Section 44(4) says:
(4)      The court shall not grant leave under subsection (3) or (3A) unless it is satisfied:
(a)      that hardship would be caused to a party to the relevant marriage or a child if leave were not granted; or
(b)      in the case of proceedings in relation to the maintenance of a party to a marriage--that, at the end of the period within which the proceedings could have been instituted without the leave of the court, the circumstances of the applicant were such that the applicant would have been unable to support himself or herself without an income tested pension, allowance or benefit.
The first step is to establish whether there is some hardship and of course, in that process, the applicant has to prove that there is a case to be litigated. The wife needs to satisfactorily explain the delay and then ultimately having done that, seek the exercise of discretion in circumstances where there is a balancing of the parties’ respective interests.
In this case, the wife says with the steps that the parties took in relation to the resumption of the marriage relationship and their commercial activities thereafter together with the current pressures from creditors exacerbated by the husband’s bankruptcy, it would cause enormous hardship for the wife if she was not able to proceed with her case.
Section 44(3) of the Act was recently considered in Keith and Soukis [2007] FamCA 1017. There, the Full Court said:
30.In Whitford & Whitford (1979) FLC 90-612, the Full Court (Asche & Pawley SJJ and Strauss J) identified the “two broad questions” which arise for determination on an application for leave pursuant to subsection 44(3) (at 78,144):-
Thus, on an application for leave under sec. 44(3), two broad questions may arise for determination. The first of these is whether the Court is satisfied that hardship would be caused to the applicant or a child of the marriage if leave were not granted. If the Court is not so satisfied, that is the end of the matter. If the Court is so satisfied, the second question arises. That is whether in the exercise of its discretion the Court should grant or refuse leave to institute proceedings.
31.The Court went on to state in Whitford (supra) that the hardship reference in subsection 44(4) of the Act is not a reference to the loss of a right to institute proceedings, but rather a loss of that opportunity where it is clear to the Court that:
…[T]he applicant would probably succeed, if the substantive application were heard on the merits. If there is no real probability of success, then the Court cannot be satisfied that hardship would be caused if leave were not granted. Further, the matter with which the Court is concerned is not whether the applicant or a child is suffering hardship, but the question is whether the applicant or a child would suffer hardship if leave were not granted. 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.
32.Ellis J in Gill and Gill [1999] FamCA 240 interpreted the test in Whitford (supra) in the following terms (at paragraphs 22 and 23):
It can thus be seen that proof of hardship is a necessary pre-condition to the exercise by the Court of its discretion. The generally accepted interpretation of hardship, in the context of s.44(3), is “substantial detriment”. The loss of the right to institute the proceedings itself, however, is not hardship within the meaning of the section. Fundamental to the inquiry as to hardship is, as was said in Frost and Nicholson (1981) FLC 91-051, whether the applicant has a reasonable claim to be heard by the Court. That is not by itself necessarily the same thing as hardship but the stronger the applicant’s prima facie case, the greater the likelihood of hardship if leave were refused.
Nothing which has been put on behalf of the husband under the first of the three headings, in my view, demonstrates that the trial Judge erred as asserted. In my view, it was open to him to conclude that hardship would be caused to the wife if leave were not granted. In the ultimate, the trial Judge found that the claim of the wife was a small claim but that must be viewed, in my judgment, in the light of the circumstances, including the financial circumstances of each of the parties at the date of the hearing.
33.As to the explanation for delay, the Full Court stated in Carlon and Carlon (1982) FLC 91-272 (at 77,533):-
[I]t is in our judgment a correct statement of the law that while Parliament in sec. 44(4) has placed a fetter on the discretion of the Court, the Court itself should not and probably cannot do the same by laying down any strict principles such as that a party must give an adequate explanation for delay. Once hardship has been established in the sense referred to in Whitford (supra) then the Court is in the exercise of its discretion at large and should take into account all relevant facts including, if that be the case, that no or no satisfactory explanation has been given for delay. Such a position namely no or no satisfactory explanation for delay is no more than another factor which must be given appropriate weight in the exercise of discretion.
On the evidence before me which is drawn from the affidavits of the wife filed 1 February 2008 and 20 October 2008, I find that the wife would have succeeded in an application if it had been heard on its merits. In my view, the wife has a strong claim to a property settlement. In addition, it cannot be lost upon the Court that the parties chose to live a long relationship together after reconciling and resuming their married relationship just after the divorce. The husband has not filed any material to contradict that. To refuse leave in those circumstances would cause hardship to the wife because she would be unable to deal with the pressing issue of the creditors let alone the application to resolve the financial issues between she and the husband. In my view, having regard to the husband’s bankruptcy, there is no prejudice to him.
Accordingly, it is appropriate that the wife have leave and I intend to order that she have a right to proceed.

The next issue relates to what it is that is in the pool of assets for division between the parties. On any view, the pool is currently undefined because the order for the sale has not been carried out. Mr Spicer for the wife told me that there had been three different values opined in relation to the value of the O Business. The gap between the highest and the lowest is around $600,000. To enable me to do justice to both parties and potentially to the wife and the trustee of the husband’s bankrupt estate, I would have to know the divisible pool. Mr Spicer said that the husband could participate in the proceedings in relation to the justice and equity issue if he filed appropriate material. That is the view that I have adopted in relation to ascertaining his future for the purposes of at least the s 75(2) factors.
Section 79(5) of the Act provides that a court can adjourn proceedings if there is likely to be change in the parties’ financial circumstances. That is clearly what is likely to happen here depending upon what happens with the sale of the O Business.
In the circumstances, the only course of action open to me is to continue the proceedings at a future date when the pool of assets has crystallised.
I have already ordered that the husband be excluded from the proceedings by virtue of his conduct. I had said however that that is limited. The limitation that I have in mind is that he can participate to address the issues of how the pool will be divided once it has crystallised. I will make very clear orders about what documents he has to file if he wants to participate in that process. In the discussions in the courtroom at the time that this was contemplated, the husband behaved in such a way that I excluded him from the courtroom. I have indicated in the orders that I am proposing there will be a provision for the orders and judgment to be served by my Associate by mail on the husband at his known address. If he fails to file the affidavit material in accordance with the orders I make, I have every intention of continuing the exclusion of him from participating further in the proceedings and for the wife to be permitted to proceed on an undefended basis using the best information that is available. However, the husband will have an opportunity to address the Court on the question of how the ultimate proceeds should be divided if he complies with the orders and conducts himself in a proper and civilised fashion as I would expect in any courtroom from any litigant.
In respect of the orders, it is clear that the home has to be sold. The wife agrees with that course as does the trustee in bankruptcy.
Mushin J ordered that the O Business be sold by the trustee. It is obvious that the trustee wants as little as possible to do with the machinery provisions of the orders and without objection from the trustee, I propose to order that the conduct of the sale be undertaken by the wife and I propose to continue the exclusion of the husband from even attending at the O property as was previously set out in the orders of the Court.
There will no doubt be issues associated with the terms and conditions of any auction and/or private sale and its settlement. I propose to order that the wife discuss those issues with the trustee of the husband’s bankrupt estate and if there is a dispute, the matter can come back to court.

I certify that the preceding Seventy One (71) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate:

Date: 5 November 2008

[2008] FamCA 920

31 October 2008

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Property Law

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