Schult and Little
[2017] FCCA 1594
•6 July 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SCHULT & LITTLE | [2017] FCCA 1594 |
| Catchwords: FAMILY LAW – De facto property proceedings – application to proceed out of time – matters to be considered – hardship – prima facie case – explanation for delay – leave to proceed granted. |
| Legislation: Family Law Act 1975, ss.4(1); 4AA; 39B; 44(5); 44(6); 75(2); 79; 79(4); 90RD; 90SE; 90SF; 90SG; 90SM |
| Cases cited: Taisha v Peng (2013) 48 FamLR 150 Moby & Schulter (2010) FLC 93-447 Jonah v White (2012) 45 Fam LR 460 Corporation of the City of Enfield v Development Assessment Commission (2000) 199 CLR 135 Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 Bevan & Bevan [2013] FamCAFC 116 Waters & Jurek (1995) FLC 92-635 Brisbane South Regional Health Authority v Taylor [1996] 186 CLR 541 Milas v GM Holden Limited [2015] FCCA 1311 Whitford & Whitford (1979) FLC 90-612 Jacenko & Jacenko (1996) FLC 91-776 Hall, K A and Hall, J C (1979) FLC 09-679 Sharp & Sharp [2011] FamCAFC 150 |
| Applicant: | MR SCHULT |
| Respondent: | MS LITTLE |
| File Number: | ADC 64 of 2017 |
| Judgment of: | Judge Brown |
| Hearing date: | 8 June 2017 |
| Date of Last Submission: | 8 June 2017 |
| Delivered at: | Adelaide |
| Delivered on: | 6 July 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Craney |
| Solicitors for the Applicant: | Doyle Kingston Swift |
| Counsel for the Respondent: | Ms Boreham |
| Solicitors for the Respondent: | Rebecca Boreham |
ORDERS
Pursuant to section 44(6) of the Family Law Act 1975 the applicant is granted leave to proceed with his application for settlement of de facto property out of time.
The parties and their legal representatives do attend a conciliation conference with a registrar of the court on 28 August 2017 at 9:15am.
Each party and their respective legal advisers are given leave to attend the conciliation conference by telephone.
Unless otherwise exempted from payment the Applicant must pay the Conciliation Conference fee in accordance with the Family Law (Fees) Regulation 2012 twenty eight (28) days prior to the Conciliation Conference.
No later than 14 August 2017 the parties exchange informal discovery of all relevant documents as specified in Order 24 Rule 4 of the Federal Circuit Court Rules.
Further consideration of the matter is adjourned to 1 November 2017 at 9.30 am for further directions in the court’s circuit to (town omitted).
IT IS NOTED that publication of this judgment under the pseudonym Schult & Little is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 64 of 2017
| MR SCHULT |
Applicant
And
| MS LITTLE |
Respondent
REASONS FOR JUDGMENT
Introduction
The parties to these proceedings are Mr Schult and Ms Little. They have never been married. They are the parents of [X], who was born in (town omitted), on (omitted) 2012.
Mr Schult was born on (omitted) 1959. He is a (omitted) by profession. At present, he is in receipt of a carer’s allowance, whilst he tends to his elderly mother, who lives in (town omitted).
Mr Schult also has a number of health issues. He has been diagnosed with post-traumatic stress disorder; depression; hearing loss; and a back injury; which relate to (omitted). As a consequence of his various disabilities, Mr Schult is entitled to a (omitted) pension.
Ms Little was born on (omitted) 1971. She is employed as a (omitted). Currently, she is living with her husband, whom she married in October of 2015, at Property A, near (town omitted). She is the sole registered proprietor of the Property A property, which is subject to a mortgage in favour of the (bank omitted).
There is no controversy between Mr Schult and Ms Little that they were in a de facto relationship, as defined by section 4AA(1) of the Family Law Act 1975 “the Act”, between 2002 and mid-2014. The Property A property was purchased on 23 April 2014.
The purchase price of the Property A property was $256,000.00. At the time of its purchase, the (bank omitted) advanced $80,000.00. It is Mr Schult’s position that he provided all of the remainder of the funds required to purchase the property, which amounted to somewhere in the vicinity of $195,000.00.
In particular, Mr Schult asserts that he provided the proceeds of sale of a unit, which he owned in (town omitted), which he sold around Christmas of 2013, for $116,000.00; a gift of $20,000.00 from his father; the sale of some shares; and the remainder of a compensation payment received by him.
From these various sums, it is Mr Schult’s case that he paid the deposit on the purchase price of the Property A property, in the sum of $26,500.00; together with legal fees associated with its purchase in an amount of $1,454.03; and stamp duty on the transaction of $2,187.00; as well as the difference required between the purchase price and the mortgage advance.
Ms Little agrees that she herself did not have any significant assets, at the time the Property A property was purchased. It is her position that she did not want to purchase the property but Mr Schult insisted. As a consequence, it is her case that Mr Schult gifted her the sum of $195,000.00 in order to purchase the property.
After April of 2014, the parties and [X] lived in the Property A property together, as a family. However, it seems to be common ground that the relationship between the parties was not a happy one, at the time. On 29 August 2014, police were called to the property and Mr Schult was removed from it by them.
Subsequently, Mr Schult was subject to an apprehended violence order taken out by police, which prevented him returning to the property. He has not lived at the property since. Both parties regard 29 August 2014 as the date at which their de facto relationship came to an end.
For obvious reasons, 29 August 2014 is not likely to be a date, which either party will easily forget. Without doubt, what happened on that day was traumatic for all concerned and its emotional significance continues to reverberate for both Mr Schult and Ms Little.
Mr Schult commenced these proceedings on 10 January 2017, some 28 months after this date. He seeks an order for the settlement of de facto property between the parties. In particular, he seeks that Ms Little pay him the sum of $175,000.00 or failing the payment of this sum, that the Property A property be placed on the market for sale and, after its sale, he be paid this sum, after payment of all necessary selling costs, with any remainder to go to Ms Little.
Ms Little responded to this application on 23 May 2017. She seeks that Mr Schult’s application be struck out on the basis that it has been brought out of time and therefore the court has no jurisdiction to deal with it.
In the alternative, she deposes that leave not be granted to Mr Schult to commence these proceedings on the basis that he does not have an arguable case for settlement of de facto property orders to be made in his favour.
This submission turns on how she characterises the monies advanced by Mr Schult to complete the purchase of the Property A property, which she asserts were an unconditional gift made to her. It is also her case that Mr Schult has not provided an adequate explanation as to why he commenced the proceedings out of time.
Pursuant to section 39B of the Act, this court has jurisdiction conferred upon it in respect of what are termed de facto financial causes. This expression is defined, by section 4, to include proceedings in respect of the distribution of the property of the parties to a de facto relationship. Accordingly, Mr Schult’s application falls with the court’s jurisdiction.
Part VIIIAB of the Act deals with financial matters relating to de facto relationships. In particular, pursuant to section 90RD, the court has authority to make a declaration about the existence of a de facto relationship, including when that relationship ended and pursuant to section 90SM, the authority to alter the proprietary interests of the parties to a de facto relationship, after the breakdown of that relationship.
However, time limits are imposed in respect of such applications. Pursuant to section 44(5) subject to subsection (6), a party to a de facto relationship may apply for an order under section 90SM:
“…only if the application is made within the period of 2 years after the end of the de facto relationship (the standard application period).”
However, pursuant to section 44(6):
“(6) The court may grant the party leave to apply after the end of the standard application period if the court is satisfied that:
(a)hardship would be caused to the party or a child if leave were not granted; or
(b)in the case of an application for an order for the maintenance of the party—the party’s circumstances were, at the end of the standard application period, such that he or she would have been unable to support himself or herself without an income tested pension, allowance or benefit.”
Accordingly, given the agreed date on which the parties separated (29 August 2014), it is clear that Mr Schult’s application is out of time and, accordingly, he needs the leave of the court, pursuant to section 44(6), to proceed with it. These proceedings are directed to resolving this issue.
The applicable legal principles
As indicated above, there is no controversy that the parties, in this matter, were in a de facto relationship at the time the Property A property was purchased and Mr Schult made the alleged gift of $195,000.00 to Ms Little. In my view, in considering the implications of this action, on Mr Schult’s part, it is necessary to outline what is the legal nature of a de facto relationship.
The definition of de facto relationship is defined in section 4AA(1) of the Act as follows:
(1) A person is in a de facto relationship with another person if:
(a) the persons are not legally married to each other; and
(b)the persons are not related by family (see subsection (6)); and
(c)having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.”
Section 4AA(2) is prefaced by the heading “Working out if persons have a relationship as a couple”. Thereafter the following circumstances are delineated, which may denote the existence of such a relationship. The list provided is not exhaustive and the factors on it are not specifically noted to be directive. They are as follows:
(a) the duration of the relationship;
(b)the nature and extent of their common residence;
(c)whether a sexual relationship exists;
(d)the degree of financial dependence or interdependence, and any arrangements for financial support, between them;
(e)the ownership, use and acquisition of their property;
(f)the degree of mutual commitment to a shared life;
(g)whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;
(h)the care and support of children;
(i)the reputation and public aspects of the relationship.
Section 4AA(3) & (4) provide, in effect, that no particular finding is to be regarded as necessary or definitive before the court finds that a de facto relationship exists in the specific case with which it is concerned. Rather the court may have regard to the matters and attach weight to those matters as it considers appropriate to do so.
As such, the list of matters contained in section 4AA(2) is not to be regarded as some sort of checklist. Rather it is a guide. The court is required to apply individualised justice to the idiosyncratic circumstances of each particular case coming before.
In Taisha v Peng[1] Cronin J held that section 4AA(1) contained the mandatory requirements “for the existence or otherwise of a de facto relationship, whilst the matters listed in section 4AA(2) were to be utilised as a guide only for the purposes of the preceding sub section.”
[1] See Taisha v Peng (2013) 48 FamLR 150 at 152
Mushin J in Moby & Schulter[2] considered that the question of whether the parties concerned were in a de facto relationship “must be considered on a case-by-case basis without circumscribing any particular factor”. Accordingly, it is potentially erroneous for the court to attempt to isolate individual factors and attribute relative degrees of importance. It is the “composite picture” which is important.[3]
[2] See Moby & Schulter (2010) FLC 93-447 at 85,063
[3] See Taisha v Peng (supra) at 153
In Jonah v White Murphy J indicated that “the key” to the definition contained in section 4AA(1) was:
“…the manifestation of a relationship where “the parties have so merged their lives that they were, for all practical purposes, ‘living together’ as a couple on a genuine domestic basis”. It is the manifestation of “coupledom”, which involves the merger of two lives as just described, that is the core of a de facto relationship as defined and to which each of the statutory factors (and others that might apply to a particular relationship) are directed.”[4]
[4] See Jonah v White (2012) 45 Fam LR 460 at 471
In Moby & Schulter Mushin J considered that the concept of “genuine domestic basis” was not a term of art but must be given its ordinary meaning. In particular, he considered that due regard must be had to the circumstances of modern life, which necessarily has the potential to throw up diverse relationships outside of the norm, which could nonetheless be considered genuine domestic ones, in common parlance.[5]
[5] See Moby & Schulter (supra) at 85,067
Domestic derives from the Latin domus, literally a home. As an adjective, it pertains to the home, household or family affairs.[6] In this context Cronin J, in Taisha v Peng said as follows:
“… there must still be evidence of a domestic relationship. Mushin J in Moby said it was not a term of art but had to be given its ordinary meaning. I respectfully also adopt that because, having regard to s 4AA(4), the Court can take a wide discretionary view of the way in which the parties themselves conducted their relationship. Even having said that however, a domestic relationship must be one in which there are activities of running a household or shared households. That is, something must be seen to be related to domesticity which refers to home conditions and arrangements. For example, it could be indicated by people coming and going as if entitled to use and share the home’s facilities which is quite distinct from a boarding house or backpacking hostel where individuality reigns.
A couple therefore living in a domestic relationship is the opposite of a couple of individuals.”[7]
[6] See the Australian Oxford Dictionary
[7] See Taisha v Peng (2013) 48 FamLR 150 at 153
Again, in Jonah, Murphy J considered that, along with coupledom, a second specific element of a de facto relationship was the individuals concerned living together. In Moby & Schulter Mushin J said as follows:
“In my view, if a couple do not live together at any time, they cannot be seen as being in a de facto relationship. However, the concept of “living together” does not import any concept of proportion of time. In particular, it does not require that a couple live together on a full time basis. On the basis that one or both members of the couple may also be legally married or in another de facto relationship at the same time as they are in the subject relationship, it must follow that it is feasible that the subject relationship might involve the parties living together for no more than half of the time of that relationship. Further, there is nothing to suggest that it must be even as much as half of the time.”[8]
[8] See Moby & Schulter (supra) at 85,063 [140]
In Jonah v White[9] Murphy J held that the making of a declaration, pursuant to section 90RD, does not involve the exercise of a judicial discretion. Rather, it is an issue to be resolved by the determination of fact. He said as follows:
“The ultimate question is in the nature of a jurisdictional fact. In Corporation of the City of Enfield v Development Assessment Commission[10] the High Court held:
The term “jurisdictional fact” (which may be a complex of elements) is often used to identify that criterion, satisfaction of which enlivens the power of the decision maker to exercise a discretion.”
[9] See Jonah v White (2012) 45 Fam LR 460 at 466
[10] See Corporation of the City of Enfield v Development Assessment Commission (2000) 199 CLR 135 at 148
The power to make a declaration, as to the existence or otherwise of a de facto relationship, arises pursuant to section 90RD(1) of the Act. Pursuant to the section, if an application is made pursuant to any of sections 90SE, 90SG or 90SM, following the breakdown of a de facto relationship: “the court may, for the purpose of those proceedings … declare that a de facto relationship existed, or never existed [between the applicant for such a declaration and another specified person]”.
The court’s authority to make such a declaration is refined by section 90RD(2) which, as well as making reference to the other jurisdictional pre-conditions referred to above, provides that the court with the power to make declarations regarding the following:
·the period or periods of the de facto relationship;
·whether there is a child of the de facto relationship;
·whether one of the parties to the de facto relationship made substantial contributions;
·when the de facto relationship ended;
·where each of the parties to the de facto relationship was ordinarily resident during it.
These provisions contained in section 90SM are analogous to the provisions applicable to matters relating to the division of property and spousal maintenance of married individuals contained in Part VIII of the Act, particularly section 79. Accordingly, the same jurisprudence is applicable to be both sets of provisions.
Pursuant to section 90SM(1) the court is authorised to make such order as it considers appropriate in order to alter the interest of the parties to a de facto relationship in relevant property.
The expression “property” is defined in section 4(1) in relation to the parties to a marriage or either of them as meaning “…property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.”
Pursuant to section 90SM(3) the court is actively prevented from making an order altering proprietorial interests, unless it is satisfied that it is just and equitable to do so in all the circumstances prevailing. This follows from the use of the prohibitive words “shall not” in the relevant section.
Section 90SM(4) provides the mechanics of how a court is to make an order altering de facto property interests. It provides seven matters [in paragraphs (a) – (g)] to be considered, as relevant.
Paragraphs (a); (b); and (c); categorise contributions made by de facto partners, which are relevant. Paragraph (d) directs the court to take into account the effect of any order upon the earning capacity of either party to the de facto relationship concerned.
Paragraph (e) directs the court to consider a list of matters contained in section 90SF(3), which are germane to maintenance or the prospective positions of the parties concerned by reference to their respective financial resources, means and needs.
Finally, Paragraphs (f) and (g) apply to child support and previously made parenting orders, as relevant. There is some overlap between these various provisions and not all will be applicable in every case.
Until recently, the position in respect of the process to be applied to the resolution of both de facto and matrimonial property cases was said to be well settled, as it required the application of a preferred approach. This approach entailed a four step process, described by the Full Court as follows:
· identification and valuation of the property of the parties;
· identification and evaluation of contributions to the property (including property no longer owned by the parties) – the contribution phase – section 90SM(4) (a) to (c) or section 79(4) (a) to (c);
· identification and assessment of the various matters in section 90SM(4) (d) to (g) or 79(4)(d) to (g) including to the extent they are relevant, the matters in either section 90SF(3) or 75(2), as applicable – the prospective needs phase;
· considerations of justice and equity.[11]
[11] See Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 at 78,386 [39] and Bevan & Bevan [2013] FamCAFC 116 at [60]
Contributions arising pursuant to section 90SM(4)(a)(b) & (c) (the so-called second step) can be broadly categorised under two headings. The first kind is contributions to the property: financial contributions and non-financial contributions, made directly or indirectly, by or on behalf of a party to the de facto relationship to the acquisition, conservation or improvement of any of the property.
The second kind is contributions to the welfare of the family: in the words of the section, “the contribution made by a party to the de facto relationship to the welfare of the family constituted by the parties to the de facto relationship, including any contribution made in the capacity of home maker or parent.”[12]
[12] See Family Law Act s 90SM(4)(c)
Section 90SM(4)(e) mandates the court to have reference to the matters listed in section 90SF(3)(e) of the Family Law Act 1975. In the main the factors there listed deal with each of the parties’ prospective needs (the so-called third step).
Pursuant to section 90SF(3)(r), the court is entitled to take into account “any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account”. A number of Full Court authorities have utilised this provision to ensure that proper regard is had to a variety of considerations in order to ensure a just and equitable outcome in property proceedings.
The “overriding requirement” of section 90SM is that considerations of justice and equity should inform the process envisaged therein. The exercise I must undertake is not a “process of social engineering”[13] or of equalisation of assets or financial resources.
[13] See Waters & Jurek (1995) FLC 92-635
Considerations of this type inform the so-called fourth step, as well as providing the determination as to how the court should approach issues such as notional property. The court must make the orders it considers just and equitable.
However, before the court can come to determine whether a declaration can be made as to the existence or otherwise of a de facto relationship between Mr Schult and Ms Little or consider the question of whether it is just and equitable to make any order altering their existing proprietorial interests, on the breakdown of any de facto relationship which had hitherto existed between them, pursuant to the provisions of section 90SM, it must consider the time limit issue arising as a consequence of section 44(5).
In this case, the evidence indicates that the standard application period of two years came to an end on or about 29 August 2016. Accordingly, Mr Schult needs the leave of the court to proceed with his application pursuant to section 90SM.
The authorities are clear that limitation periods, imposed by the legislature, are not empty shibboleths. Their rationale is that it is in the interests of society, as a whole, that litigation between individuals be commenced within fixed and well understood temporal parameters so that once those parameters have been reached, all concerned can carry on with their lives in the certitude that they will not be subject to litigation in respect of events which occurred in their past.
In Brisbane South Regional Health Authority v Taylor McHugh J (with whom Dawson J agreed) pointed out that
“The discretion to extend time must be exercised in the context of the rationales for the existence of limitation periods. For nearly 400 years, the policy of the law has been to fix definite time limits (usually six but often three years) for prosecuting civil claims. The enactment of time limitations has been driven by the general perception that "[w]here there is delay the whole quality of justice deteriorates."[14]
[14] Brisbane South Regional Health Authority v Taylor [1996] 186 CLR 541 at 551
Later in the case, his Honour said as follows:
“A limitation period should not be seen therefore as an arbitrary cut off point unrelated to the demands of justice or the general welfare of society. It represents the legislature’s judgment that the welfare of society is best served by causes of action being litigated within the limitation period, notwithstanding that the enactment of that period may often result in a good cause of action being defeated. ... A limitation provision is the general rule; an extension provision is the exception to it. The extension provision is a legislative recognition that general conceptions of what justice requires in particular categories of cases may sometimes be overridden by the facts of an individual case.”
In the same case, Toohey and Gummow JJ said as follows:
“The discretion ... is to order an extension of the limitation period. It is a discretion to grant, not a discretion to refuse, and on well established principles an applicant must satisfy the court that grounds exist for exercising the discretion in his or her favour. There is an evidentiary onus on the prospective defendant to raise any consideration telling against the exercise of the discretion. But the ultimate onus of satisfying the court that time should be extended remains on the applicant.”
The Family Court has enumerated the individual considerations which inform the discretion to ameliorate the limitation period, in appropriate circumstances, where the interests of justice require that it be extended. Essentially, it is a discretion to be exercised judicially by identifying matters relevant to the discretion, in the particular case and weighing those matters against one another.[15] The discretion is to be exercised primarily within considerations of the hardship which would be occasioned to the relevant applicant.
[15] See Milas v GM Holden Limited [2015] FCCA 1311 per Judge Sullivan
In Whitford & Whitford the Full Court of the Family Court, in a case concerned with the twelve month limitation arising as a consequence of section 44(3) and the granting of a divorce order stipulated that this “… power should be exercised liberally in order to avoid hardship, but nevertheless in a manner which would not render nugatory the requirement that proceedings should be instituted within a year from the decree nisi.” [16]
[16] See Whitford & Whitford (1979) FLC 90-612 at 78,146
Accordingly, this court is not in a position to overlook the legislature’s intention that, ordinarily, property proceedings arising in respect of a de facto relationship should be commenced within two years of the breakdown of the de facto relationship in question.
The chief rationale informing this intention being that former parties to a de facto relationship are entitled to a sense of finality in respect of issues arising from their previous relationships and that delay, of itself, has the potential to lead to injustice.
However, in order to temper any potential hardship, the legislature has also provided a discretion to the court to extend time. This discretion must be exercised judiciously and advisedly. In Whitford the Full Court determined that the manner in which this discretion is to be exercised must depend on the facts of the particular case. It is an idiosyncratic decision.
Relevant matters for consideration include the length of the delay; the reasons for the delay; any prejudice occasioned to the respondent by reason of the delay; the strengths, on the merits, of the applicant’s case; and the degree of the hardship, which would be suffered unless leave was granted. These are all matters relevant to the exercise of the discretion, but not necessarily the only ones.[17]
[17] Ibid at 78,146
In Jacenko & Jacenko[18] Nygh, J. referred to the relevant principles applicable to an application pursuant to section 44(3) [the equivalent of section 44(6) applicable to divorce orders] and said as follows:
[18] See Jacenko & Jacenko (1996) FLC 91-776 at page 75,644
“The applicant must establish three principal matters: first, a reasonable prima facie case for relief, had she instituted proceedings in time; secondly, that denial of the wife’s claim would cause her hardship; and thirdly, an adequate explanation as to her delay.
…
If those three elements are satisfied, the Court should further, in determining whether to exercise its discretion to grant relief, consider the question of prejudice which the respondent would suffer by reason of the delay in bringing the application.”
In Jacenko the court considered the matters to be considered in determining whether an applicant for leave to proceed out of time had or had not established a prima facie case for relief in respect of matrimonial property settlement orders.
These considerations are relevant given the leave issue must most usually be determined as a preliminary matter, as in the current case, at an interlocutory stage, prior to a more detailed examination of all relevant evidence by the court. The court held as follows:
“… the general principles is that on the issue of the establishment of a prima facie case the Court proceeds on the basis that the evidence of the applicant, unless it is inherently unbelievable or contradictory, should be accepted, and the Court should therefore decide whether or not on that basis a prima facie case has been made out. If leave is granted, then it is for the Court conducting the ultimate hearing to determine whether the prima facie case can be established.”
In Hall and Hall[19] the Full Court of the Family Court reviewed a number of earlier cases which had addressed the issue of the required strength of the prima facie case in s44(3) applications. The Full Court said:
“These varying phrases may tend to suggest different shades of meaning whereas in reality they are directed to the same fundamental enquiry which basically is in the context whether on the applicant’s material he or she has a reasonable claim to be heard by the Court.”
[19] See Hall, K A and Hall, J C (1979) FLC 09-679
In Sharp & Sharp[20] the Full Court considered that, in the context of section 44(4), hardship involved more than the loss of a right to commence proceedings. It was what followed from the loss of that right, which was central. This was the basis of the test that an applicant must have a prima facie claim worth pursuing or a real probability of success.
[20] See Sharp & Sharp [2011] FamCAFC 150
In Sharp the Full Court also re-emphasised that the court’s power to grant an extension of time was a discretion, which had to be exercised judicially, bearing in mind all the relevant circumstances of the case concerned. In Sharp, the Full Court approved the following passage from Whitford:
“Section 44(4) inhibits the granting of leave unless the requisite case is made out, but it does not provide that leave must be granted if the Court is satisfied that hardship would be caused … Due weight must be given to the expressed legislation intendment that ordinarily, proceedings should be commenced within a year from a date of the decree nisi, and the general policy of the Act which appears from sec. 44(3) and sec. 81 that financial relationships between the spouses should, wherever possible be brought to finality within a reasonable time after the dissolution of the marriage. Hence, such matters as the length of the delay, the reasons for the delay and prejudice occasioned to the respondent by reason of the delay, and the strength on the merits of the applicant’s case, and the degree of the hardship which would be suffered unless leave were granted, are matters affecting the exercise of the discretion. These matters are not necessarily the only ones.”
The factual circumstances arising in Sharp were very different to the factual circumstances arising in this matter. The parties concerned married in 1982; separated in 2001; and divorced on 14 February 2004. Thereafter, the husband had remarried in October 2004 and later divorced his second wife in June 2008. Significantly, he had been bankrupt between April 2005 and April 2008.
The husband in Sharp filed an application seeking leave to bring property proceedings against his first wife in June 2009. It was found at both first instance and on appeal, that the delay in instituting proceedings occurred because the husband firstly did not want to receive any moneys from such proceedings, whilst he was bankrupt, as any such sum could be diverted to his creditors and secondly because he did not wish his second wife to make a claim on such a sum.
In all these circumstances, it was found that the husband had taken a “deliberate course of finalising any financial settlement with the wife to avoid his creditors and his second wife” and these were “significant matters that weigh against the exercise of discretion.”[21] Mr Sharpe did not have clean hands in seeking the exercise of a discretion, by the court, in his favour.
[21] See Sharp & Sharp (supra) at paragraph 89
For obvious reasons, the conduct of the parties in a section 44(6) application is relevant to the exercise of the discretion to extend time. The normal rule is that de facto property proceedings be brought within two years. An extension of time is exceptional. It is essentially an equitable decision.
Also highly relevant is any prejudice, which may be caused to the respondent to such an application, if leave is granted. This in turn is very often related to the length of the delay in question. All these various factors must be balanced against one another to achieve a proper outcome.
From these various authorities, in my view, the following principles may be distilled in respect of the exercise of the discretion to extend time:
·limitation periods are significant as they are created by the legislature to safeguard legitimate public interests. As such, they should not be arbitrarily over-ruled;
·however, the discretion to extend time is to be liberally exercised in order to avoid hardship;
·hardship is more than the loss of an entitlement to bring proceedings. Rather the court must look at what are the consequences, for the applicant concerned, of not being able to institute proceedings;
·the applicant must establish a reasonable prima facie case for the relief sought, if the proceedings had been brought in time. What this means is whether, on the material available, does the applicant have a reasonable claim;
·in assessing what is a reasonable prima facie case, the court should accept the evidence of the applicant concerned, at its highest, unless it is patently absurd or contradictory;
·the applicant must establish that he or she would suffer hardship if an extension is not granted;
·the discretion to extend time must be exercised judicially;
·as such, a reasonable explanation for the delay must be provided;
·Also relevant, in this context, are the following:
o the length of the delay;
o the prejudice to the respondent if leave is granted;
o any other relevant consideration.
The evidence and findings
The hearing of the application to proceed out of time took place at (town omitted) on 8 June 2017. Each party had filed an affidavit in support of their respective positions. Thereafter both Mr Schult and Ms Little provided additional oral evidence and each was cross examined by counsel for the other party. No other witness provided evidence in the proceedings.
In my assessment, this is not a case which turns on credit. I found both Mr Schult and Ms Little to be honest witnesses, who each did their best to provide a truthful account of their financial history together. As such, there are no significant accounting issues arising in the case. Where the parties differ is their view as to why the Property A property was purchased in the first place and how it came to be registered in Ms Little’s name alone.
Mr Schult presented as an emotionally fragile person, who although an honest individual, was not a particularly good historian or someone with an eye for detail, particularly in respect of financial matters. He deposed that he consulted a psychiatrist three or four times a year and had been prescribed the anti-depressant Effexor. However, he did not produce any expert psychiatric evidence to support his case.
My overall impression of Mr Schult is that he is not a very worldly or financially sophisticated person. Essentially, Mr Schult asserts that Ms Little badgered him into providing the funds for the Property A property and insisted that it be registered in her sole name. He went along with this in order to placate her. He has no recollection of signing any particular documents in connection with the purchase, describing his memory as being “very hazy”.
Ms Little asserts that she was not interested in moving out of Mr Schult’s unit in (town omitted) and living in the Property A property. From her perspective, this unit was perfectly adequate for her, Mr Schult and [X]’s needs and she considered it an act of financial folly for the family to move to a larger house and take on debt.
It is her case that Mr Schult insisted that the Property A property be purchased, which she resisted, with him overruling her objections. It was only his apparent gift to her of $195,000.00, which persuaded her to be a party to the transaction. This involved her making an application for finance from the (bank omitted), as she was working at the time and Mr Schult was not, being in receipt of a military disability pension.
Ms Little agrees that Mr Schult has significant mental health issues. She describes his behaviour at times as being “unpredictable”. She agrees that the major source of funds for the Property A property was Mr Schult and she herself contributed no money towards the purchase of the property.
Ms Little presented as somewhat resentful that Mr Schult, as she perceives it, had gone back on his gift to her. In a practical sense, if Mr Schult is given leave to proceed against her, in respect of de facto property proceedings, it will be a financial disaster for her.
She has extended the mortgage on the property from approximately $80,000.00 to $153,000.00. As such, if she is required to pay Mr Schult any significant sum of money, the Property A property will have to be sold and she, her current husband and [X] will have to find alternative accommodation.
Ms Little is aggrieved that what she characterises as Mr Schult’s feckless conduct has placed her in this invidious situation, which she asserts she had attempted to avoid, at the outset of the transaction, by ensuring that the advance made by Mr Schult was properly and legally characterised as a gift to her.
In her affidavit evidence, Ms Little deposes as follows:
“Initially, I was reluctant to take the gift from Mr Schult because I was worried about what would happen if he changed his mind. I told Mr Schult that if he wanted to be able to get it back from me, then he should do a document to say that, but he didn’t. He only did a document to say it was a gift. I should not have to pay this gift back to Mr Schult.”[22]
[22] See Ms Little’s affidavit filed 23 May 2017 at paragraph 20
Mr Schult deposes as follows:
“During the discussion about the purchase of the new property, I recall that Ms Little was obsessed with the idea that my ex-wife would make a claim on my portion of the new house. Ms Little went on and on about her need for security and eventually, I agreed to have the house purchased in her sole name.
We arranged a mortgage through the (bank omitted). I acknowledge that the mortgage is in Ms Little’s sole name, but that was because the (bank omitted) insisted on that situation. Another reason that the mortgage was in Ms Little’s name, was that Ms Little was working full time and I was still on causal wages.”[23]
[23] See Mr Schult’s affidavit filed 10 January 2017 at paragraphs 25 – 26
The documentary evidence surrounding the gift is a pro forma document, which has been completed in handwriting and signed by Mr Schult. Mr Schult acknowledges his signature, but asserts he cannot remember signing the document in question, which reads as follows:
“Confirmation of non-repayable gift
I [Mr Schult] of (address omitted), (town omitted) have made a gift of $190,000.00 to Ms Little of (address omitted).
These funds are to assist in the purchase of the property know as: Property A
And I confirm the said gift is not repayable at any time.
Dated
Signed”[24]
[24] See Annexure SDL 2 to Ms Little’s affidavit
The alleged Deed of Gift is a brief document. It is not witnessed. I do not disbelieve Mr Schult’s evidence that he has no specific recollection of executing the document, although obviously, on its face, it is an instrument of some significance.
It also does not seem to me to be improbable that Ms Little would have wished to have the security of having the Property A property registered in her name because of her concerns about potential claims against it from third parties.
On the other hand, Ms Little’s evidence that the motivation for Mr Schult’s actions was so that he could retain his Department of Veteran’s Affairs pension benefits seems to me to be somewhat improbable.
During the course of her evidence, Ms Little acknowledged that a mortgage broker prepared the gift instrument. This was because Ms Little’s financier was not prepared to advance the mortgage loan to her alone, on the basis of her level of income and then asset backing. On this basis, it seems to have been the mortgage broker’s idea that the Deed of Gift be prepared and executed to assuage the concerns of the mortgagee.
Essentially, the deed of gift instrument was a device to ensure that Ms Little could be the sole registered proprietor of the property, which was her desire and also be approved, by (bank omitted), to be the sole mortgagee on the property. Without the instrument in question, the Bank would not have been prepared to advance the mortgage.
In any event, in my view, the most significant factual circumstances surrounding the alleged gift is that the parties remained in a de facto relationship. Although this relationship was obviously under some pressure, I am satisfied that there was a continuing merger of the parties’ financial affairs and they remained living in a state of joint coupledom together.[25]
[25] See Jonah v White (2012) 45 FamLR 460 at 471
Other indicia of a de facto relationship were also present. The parties were engaged in the parenting of [X]; they shared the accommodation at the Property A property; and the relationship between them was one of reasonably significant length. In any event, there is no argument that when the Property A property was purchased and when the parties separated, a few months later, they were in a de facto relationship.
It is in this context, in my view, that the court must consider the nature of the advance made by Mr Schult. It was made during the currency of the parties’ relationship and in order to provide joint accommodation for them and their child. Although the parties disagree about the specific motivation for the purchase of the property, they moved into it as a couple. Most significantly, without Mr Schult’s funds, the purchase of the property would not have been possible.
The fact that the property remains in Ms Little’s sole name does not protect it from a claim by Mr Schult for the settlement of de facto property. In my view, the advance made by Mr Schult, which is directly tied to the acquisition of the Property A property, can only be considered a direct financial contribution solely attributable to him, within the terms of section 90SM(4)(a)(i) of the Act.
As such, it is a factor relevant to whether it would be just and equitable to make an order altering the parties’ proprietorial interests pursuant to section 90SM(3). On this basis I consider that Mr Schult has a strong prima facie case that the moneys advanced by him to Ms Little, which enabled the purchase of the Property A property, cannot be characterised as some form of unconditional gift, which is beyond the reach of Part VIIIAB. Rather, the true nature of the advance is as a significant financial contribution made within the context of a de facto relationship between the parties.
If Mr Schult is not given leave to proceed out of time, I consider that he would suffer a significant degree of hardship. He cannot be regarded as a wealthy person. He is fifty seven years of age. He suffers from various disabilities. As such, his capacity for self-support is limited.
The sum of $195,000.00 represents a significant component of the property Mr Schult has been able to accumulate through his working life, up to this stage. The sum is vastly greater than any sum referrable to Ms Little in respect of either the acquisition of the Property A property or otherwise by her during the parties’ relationship.
As such, for Mr Schult to be unable to have this direct financial contribution acknowledged, in some way, on his behalf, in any finalisation of his fiscal relationship with Ms Little would be both unfair to him and constitute a significant hardship.
The direct consequence of him not being able to proceed would be that he would be deprived of a significant proportion of his life savings; whilst Ms Little would retain a property in respect of which she had made only a very modest financial contribution. This is clearly a hardship which goes well beyond the loss of an entitlement to bring proceedings.
The more difficult aspect of Mr Schult’s case is his explanation for the delay in bringing proceedings. Essentially, it is Mr Schult’s position that the period between August 2014 and January 2017 was a period of flux and emotional stress for him. Shortly after the parties’ separation, he left (town omitted) and went to live with his parents, in (town omitted). Neither of them was in good health.
As a result of his move to (town omitted), Mr Schult gave up his casual employment as a (occupation omitted). It is his evidence that he was not able to obtain alternative employment in (town omitted), which placed financial pressure upon him.
It is Mr Schult’s evidence that, shortly after the parties separated, he engaged in difficult and protracted negotiations, with Ms Little and those representing her, in an attempt to spend time with [X]. It is the implication of his evidence that this was the main focus of his formal engagement with Ms Little.
I accept that the evidence indicates that Mr Schult and Ms Little were engaged in various negotiations in respect of arrangements between them – both parenting and financial – in the period after their separation, in August of 2014. I also accept that, from Mr Schult’s perspective, his main preoccupation was on being able to see [X], whom he dearly loves.
I do not believe that I have been provided with the full extent of the various correspondence, which passed between the parties in this period. Mr Schult instructed his solicitor to arrange a legal aid early intervention conference, but Ms Little refused to attend. An agreement was later reached, by means of solicitors, that Mr Schult would spend time with [X], during each third weekend.
On 5 March 2015, Ms Little’s solicitors sent a letter to Mr Schult’s then solicitor broaching issues relevant to both the care of [X] and the settlement of property. On 3 May 2015, Mr Schult sent an email, to Ms Little’s then solicitor, with the subject property settlement. The email read as follows:
“I have instructed my lawyer doyle kingston and swift that I will be undertaking the negotiations for consent orders and minute of consent concerning my assets.
The main being the house and contents at Property A.
I can allege and prove that I have put all of the money into buying that house and contents. Ms Little holds a mortgage of the residence but did not contribute any cash when we bought it in 2014.
Therefore I seek a 50 50 split with Ms Little.
Which is only fair.
I am handling all negotiations concerning the assets that were at one time shared by both of us.
I look forward to your clients response.”[26]
[26] See annexure SDL3 to Ms Little’s affidavit filed 23 May 2017
In my view, what is clear from this correspondence is that Mr Schult had unequivocally indicated that he wished to pursue the resolution of de facto property proceedings between him and Ms Little and, in this context, did not accept that the Property A property was not relevant to those discussions, particularly given the level of his financial contribution towards it.
In these circumstances, in my view, Ms Little was not under any misapprehension, from an early stage, as to what was Mr Schult’s position in respect of the Property A property and the alleged gift which had led to its acquisition. Accordingly, I do not think it can be said that Ms Little was lulled, in any way, into thinking that Mr Schult was disinterested in pursuing de facto property proceedings against her or otherwise conceded any issue in respect of the Property A property.
On 5 May 2015, Mr Schult’s current solicitors wrote to Ms Little’s former solicitors indicating as follows:
“We have now clarified with our client who intends to instruct us in relation to children’s issues only. He will negotiate direct with you regarding the property matter.”[27]
[27] Ibid at annexure SDL6
On 12 May 2015, Ms Little’s then solicitors wrote to Mr Schult directly seeking informal discovery of relevant financial documents. The solicitors’ letter contained a proposed schedule of the parties’ assets and liabilities, which included the Property A property at a value of $256,000.00, subject to a liability of $80,000.00. No formal proposal was put as to the resolution of the matter. Mr Schult was encouraged to seek independent legal advice.
The letter of 12 May does not allude to any time frame issues. I appreciate that the solicitors concerned were under no obligation to inform Mr Schult that there was a time limit applicable to formalise de facto property proceedings.
In this context, I consider it germane to point out that there are distinct practical differences arising as a consequence of the end of a de facto relationship as opposed to the end of a marital relationship. Unlike parties who marry, there is no specific point of demarcation indicating precisely when a de facto relationship formally is brought to an end, unlike a marriage.
When they marry, the parties concerned are presented with a certificate memorialising the event, after having undergone a formal ceremony. The parties to a de facto relationship are not, as a matter of course, presented with documentary evidence of their relationship and there is no formal ceremony required to mandate its commencement.
Similar considerations arise at the formal end of a marital relationship, which occurs with an application to the court and the making of a divorce orders, which is memorialised with a certificate of divorce, upon which is endorsed the following:
“If a party to the marriage proposes to make an application to a court exercising jurisdiction under the Family Law Act 1975 as to property or maintenance, such application must be made within 12 months from the date upon which this divorce order takes effect. After that time such an application cannot be made without first obtaining the leave of the court to do so.”
No such formal admonition is made available to the parties to a de facto relationship, following the end of their relationship. Certainly no such indication appears to have been provided by Ms Little’s solicitors, in the correspondence passing between them and Mr Schult.
It is Mr Schult’s evidence that his father died on (omitted) 2015. Thereafter, he had to take up the role of main carer of his mother. It is his position that these matters and the on-going conflict about arrangements for [X] distracted him from concerning himself with the de facto property matters with Ms Little.
On 17 January 2016, Mr Schult re-instructed his former solicitors in respect of property matters and they wrote to Ms Little’s former solicitors in the following terms:
“Our client is now anxious to negotiate an equitable property settlement. On the available facts, our client made an overwhelming contribution to the asset pool and now seeks a property settlement that reflects his contribution.”[28]
[28] Ibid at annexure SDL8
Ms Little’s then solicitors responded to this letter on 26 April 2016 under cover of which was provided informal discovery of some financial documents relating to Ms Little. There is nothing in this correspondence to indicate that this was anything other than an unexceptional family law matter, involving negotiations between the solicitors concerned.
It is Ms Little’s apparent complaint that Mr Schult thereafter did not instruct his solicitors to act with due expedition. However, be this as it may, she and those advising her were well aware of what was Mr Schult’s position, in respect of the Property A property well in advance of the expiration of the limitation period.
In this context, it seems to me that the delay in bringing proceedings cannot be regarded as an inordinate one, being a matter of approximately four months. In addition, prior to the expiration of the limitation period, Mr Schult had given no obvious indication that he was either abandoning his application for a property settlement or otherwise resiled from his position that he had made the overwhelming contribution to the acquisition of the Property A property.
It is in this context that potential prejudice to Ms Little must be considered. In my view, such prejudice must be more than the fact that any potential proceedings may result in her having to provide some form of settlement to Mr Schult or that the Property A property may have to be sold to satisfy his claim.
In this context, the concept of prejudice refers to any difficulty Ms Little may have in defending the proceedings because of the effluxion of time, particularly because of the absence of a witness or the unavailability of some document or other or because of the inevitable consequences the passing of time has for the quality of human memory and the recollection of events.
In this particular case, I am satisfied that there is no such prejudice likely to be accorded to Ms Little. The various issues between her and Mr Schult are well defined and have been for some time. As such, it cannot be said that she has been taken by surprise by Mr Schult’s application.
When all is said and done, Mr Schult’s explanation for the delay is that he was at sea, both emotionally and practically, in the face of his separation from Ms Little and [X] and in the light of the other stressors in his life thereafter. I accept that he is not a robust person psychologically and is not one who is particularly adept at managing his personal affairs.
These factors, although not constituting a particularly compelling set of circumstances, represent nonetheless an acceptable explanation for the delay in bringing proceedings, particularly when consideration is given to the significant financial hardship which will befall Mr Schult if he is not accorded leave.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and twenty-seven (127) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 6 July 2017
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