Star and Star

[2013] FamCA 91

FAMILY COURT OF AUSTRALIA

STAR & STAR [2013] FamCA 91

FAMILY LAW – PRACTICE AND PROCEDURE – Section 44(3) application – Husband could not satisfy the hardship criterion because no substantive claim likely to succeed.

Family Law Act 1975 (Cth)

Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541
Cox & Cox (1981) FLC 91-068.
Hedley & Hedley [2009] FamCAFC 179; (2009) FLC 93-413
McDonald & McDonald(1977) FLC 90-317
Sharp & Sharp [2011] FamCAFC 150
Swallow & Swallow (1977) unreported decision of Emery J
Walker & Walker (1984) FLC 91-564
Whitford& Whitford (1979) FLC 90-612

APPLICANT: Mr Star

RESPONDENT: Ms Star

FILE NUMBER: MLC 1701 of 2009

DATE DELIVERED: 6 February 2013

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 21 January 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Stewart

SOLICITOR FOR THE APPLICANT: Stephen Farmer and Associates

COUNSEL FOR THE RESPONDENT: Ms Smallwood

SOLICITOR FOR THE RESPONDENT: Marshalls & Dent

Orders

1. That the application of the husband filed 27 September 2012 is dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Star & Star has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 1701  of 2009

Mr Star

Applicant

And

Ms Star

Respondent

REASONS FOR JUDGMENT

1. By his application filed 27 September 2012, Mr Star (“the husband”) sought leave under s 44(3) of the Family Law Act 1975 (Cth) (“the Act”) to commence property division proceedings against Ms Star (“the wife”) arising out of the ending of their marriage. For my convenience, I shall still refer to them as husband and wife.

2. The husband and wife married in 1975 and by order of the Federal Magistrates Court on … May 2009, were divorced.  The time limit for commencing a property proceeding expired in 2010.  The husband said that a refusal of leave by the Court would create hardship for him.  The wife submitted that no such hardship would arise because the husband was not entitled to anything anyway. 

3. Although these applications should normally be determined on the documents filed, I permitted limited cross-examination.  Each party filed an affidavit and each was cross-examined upon it.  Upon the conclusion of the evidence, each counsel made submissions.

4. In this case, bearing in mind the standard of proof is the balance of probabilities and the onus of proof lies with the husband, I find that there is no ground to give him leave.

5. The husband is 60 years of age and works in the advertising industry.  He earns a modest income.

6. The wife works in the health care industry and also earns a modest salary to which is added investment income.

7. The parties disputed the date of their final separation.  The husband said it was 15 February 2008 whilst the wife said it was 2005.  In their joint application for divorce, each said it was 1 January 2007. 

8. After their long marriage in which two children were born, the relationship faltered in 2003.  According to the wife, it had been in slow decline but that altered when the husband became aware of withdrawals from the joint line of credit through the wife’s attendances at gambling venues.  The parties disputed each other’s version of the amount that was gambled.  The husband said he found withdrawals exceeding $120,000 but the wife maintained that the gambling losses were about $25,000.  She said that during the same period, they were renovating their house and thus, by inference, the $120,000 went towards their benefit and not just her gambling.  It is not necessary for me to make a finding about the quantum suffice to say, it was a large sum of money and the parties obtained counselling about the problem.  On the evidence however, it was obvious that the slow decline in the marriage relationship was then hastened.

9. A home loan was then jointly obtained in October 2003 to enable the husband to purchase a boat.  To do so, they borrowed not only the purchase price but also enough for the transport costs.  It was a large boat on which the husband could live.  The purpose was to allow him to live somewhere when the wife wanted time to herself.  Despite this evidence having all of the hallmarks of the ending of the marriage and the husband going to live on the boat, the husband continued his attendances at the parties’ home occasionally and the parties still went out for dinner and attended family functions at least until the year 2005.  In late 2003 however, the parties agreed to get the former matrimonial home ready for sale in the following year and that is exactly what happened.  That too suggests the ending of the relationship occurred around that time.

10. By January 2005, when the sale of the house was completed, the boat loan stood at $172,000.  Just what value the boat had, I am unsure even though the husband’s estimate was $130,000.  It had not long been acquired for $155,000. 

11. Despite the sale of the home, the ending of the relationship was quite different from the ending of the marriage.  There was a physical separation but at various times thereafter, the parties shared accommodation including a Queensland holiday.  There was intimacy but not after 2007 and the wife described their relationship as amicable.  To use the wife’s expression, they “sort of” enjoyed each other’s company.

12. I accept the husband’s version which also coincides with the divorce application and find the marriage did end in February 2008 because that was the point of no return and the cessation of any semblance of a relationship. 

13. The sale of the home had been effected in about October 2004 and in anticipation of its settlement, the husband did some calculations on his computer about what each of the parties had in terms of finances.  What was described in evidence as a “reconciliation” statement became a controversial subject but after listening to the husband, I find it was an innocuous document.  However, it was one which caused considerable angst in the proceedings because of the way it was used by the husband’s first solicitor.

14. In a letter written in January 2012 by the husband’s first (not his present) solicitor to the wife’s solicitor, this reconciliation statement purported to explain how the parties had divided their assets at the time of the settlement of the sale of the home.  That description was inaccurate and according to the husband, his first solicitor wrote a number of matters that were just wrong.

15. There was no doubt that when the litigation dispute began to loom, the husband obtained his computer notes and altered them.  I accept he did that to explain to his own solicitor the outcome of the informal settlement (as he saw it) with the wife.  Despite a strong cross-examination of the husband that this document was prepared to advance his litigation cause, I find that it was just badly described by his first solicitor, poorly communicated by the husband when he should have known that his first solicitor had not understood him and, in any event, his approaches to his view of his entitlements were illogical and sadly misguided.

16. On 15 January 2005, the settlement of the home had taken place.  From the $870,000 gross price, the Veridian Line of Credit loan of $359,000 along with the $172,000 boat loan were paid out.  Debts to the parties’ respective parents were paid totalling $44,000 or thereabouts.  Sale costs amounting to about $23,000 were then paid leaving $272,000 remaining.  Of that, the wife received $212,000 and the husband $60,000.  From the husband’s share, it would also appear $4896 discharged a credit card debt.

17. Bearing in mind the nature of the parties’ relationship at that time, it is conceivable that the credit card had been used for joint purposes.  That was the husband’s position but the wife seemed unsure.  Because the parties were still enjoying each other’s company at that time, I am prepared to find that the credit card was such a debt which means that the husband received only about $55,000.

18. The immediate question is why the proceeds were so divided because there was no purchase by the wife of another house on the horizon.  The parties rented a property with the husband paying the bond.  They continued their relationship (of sorts) regardless of how each perceived it. 

19. The husband said there were a number of discussions about what to do with the proceeds of sale and that the wife had said she wanted to buy another property.  He referred to one such discussion occurring two weeks before the settlement at a meeting with their bank.  The wife denied there were any such discussions about her purchasing another property but she did not deny that there were discussions about what to do with the money.  The wife pointed to the fact that she did not buy another property until over three years later as a reason to say that there was no such discussion about buying one in January 2005.  Having regard to the wife’s concession that there were discussions about the proceeds, I find it more probable than not that she did say she would buy another property but there was clearly no intention to do so in terms of the immediately foreseeable future.

20. The husband said that when they divided the cash, he was happy to permit the wife to retain the greater portion of the cash proceeds.  The wife said there was an agreement that they would “share equally the net proceeds from the sale” but that must have depended on what debts were paid out because part of the husband’s share went to pay out the boat loan.  Thus, it is instructive to return to the mathematics.

21. The sale price was $870,000.  From that, $359,000 went to the mortgage and allowing for sale costs of $23,000 and the two debts totalling $44,000, the balance was $444,000.  An equal division of that is $222,000.  If the husband’s $222,000 then paid out the boat loan of $172,000, the husband should have received $50,000; he received $60,000.  The wife received $212,000.  Those calculations sit comfortably with the wife’s approach to the division if I take into account that the husband retained the boat.

22. The husband made no reference in his evidence to how he approached the settlement but his first solicitor wrote in December 2011 that the arrangement was that the family home proceeds were to be divided equally and “other items were retained by the parties by agreement”.  Mathematically, presuming the boat loan had to be paid upon the settlement of the sale of the home, that would mean that the parties were dividing $272,000 and the husband should have received $136,000.  If the parties retained “the other items”, the husband had the major item of the boat which had been acquired a year or so before for $155,000 and each party had cars and superannuation of approximately equal amounts.  The wife also had a quarter interest in another property with her extended family and although the valuation was not done at that time, it would seem now to have been of little real value.  I shall refer to this property as “the other property”.  If the description by the husband’s solicitor was right and the mathematics above was correct, it would mean that the husband was receiving much more in asset distribution at that time than the wife. 

23. The first solicitor’s letter went on to say that the wife “then purchased” another home and was “$60,000 short” and the husband “loaned” her those funds.  Bearing in mind the wife did not buy another home for over three years, those statements were nonsensical. 

24. The husband was cross-examined about the first letter and he maintained the first solicitor had got it all wrong.  He said he did not tell the solicitor that the assets had been divided equally but the letter did not say that anyway.  When asked what he did tell the solicitor about how the assets were divided, he explained that he had said they had sold the house and he was holding the Certificate of Title to the wife’s other property as some form of security and that there was a loan or an agreement between them.  That is, he was not paid his full entitlement, whatever that was, and therefore he held the title to the other property as security.  None of that makes sense having regard to the mathematics.

25. On 12 January 2012, the first solicitor wrote again repeating that the husband had lent the money to the wife to assist her “to purchase another home at the time of their separation”.  The husband said that when he saw that letter, he told the first solicitor that he had that concept wrong too.

26. When cross-examined about what he then told the first solicitor about these errors, the husband said he told the solicitor that he held the Certificate of Title because the wife had told him that if the marriage did not work out, “a minimum of $60,000” was to be paid to him.  He said he calculated the $60,000 from the gambling money earlier mentioned.  In his mind, $120,000 for gambling had been taken by the wife and half of that was his.  He maintained that there was no concluded agreement because half of the value of the house did not take into account the gambling “and all the other things”.  He said he did not feel comfortable about giving the wife $220,000 where she had a gambling problem in circumstances where from his perspective, the marriage relationship had not been sorted out.  Notwithstanding all of that, at the settlement of the sale, it is exactly what occurred.  When asked about what he told the first solicitor as to how the assets had been divided, the husband said that he explained he was holding the Certificate of Title to the other property and that he believed there was an agreement or arrangement because of the $60,000 “loan” “or something” to go with that title.

27. The parties strongly disagreed with each other about how the husband came to be holding the Certificate of Title to the other property.  The husband said the wife agreed for him to retain it as security because she had taken the majority of the cash funds.  The wife denied that saying that not only did no such discussion occur, she was not even aware that the husband had the title.  It transpired that in a subsequent discussion by the husband with another family member long after this division of the cash had occurred, reference was made to that title and it was not long thereafter that the wife’s mother rang the husband on 25 November 2011 asking for the title to be returned.  The husband then wrote to the wife saying that she owed him $60,000.  He said that upon payment of that amount, he would hand over the title.

28. The husband acknowledged that the interest in the other property had been transferred to the wife during the marriage for pension protection purposes by the wife’s mother.  The inconsistencies in the evidence about when the relationship ended, the husband’s claimed reticence about giving the wife money because of her gambling problem yet giving her the bulk of the cash and the confusion the husband created over his own failure to correct his solicitor’s errors along with his constant reference to a loan and an unpaid agreement, I find I prefer the wife’s evidence generally.  I am strengthened in that view because of the evidence of the husband to which I shall turn in paragraph 49 below on the question of his delay in bringing these proceedings.  I reject the husband’s evidence generally as to the nature of the relationship after 2005 and his view that the wife was aware that he was holding the title.  I accept and I so find, the husband took the title without the knowledge of the wife.  I further find that on the evidence, I could not be satisfied that there was any agreement about a loan and particularly not a loan of $60,000.  I do not accept that the wife considered herself indebted to the husband.

29. Having regard to what the parties then knew and particularly the husband, how did they divide their assets? 

30. Taking into account the boat, the cash proceeds, their respective cars and superannuation (if treated as cash) but leaving out chattels which were never contentious along with the husband’s heirlooms, this settlement reflected roughly an equal division of assets.  There was an assertion by the husband, but disputed by the wife, concerning his initial financial contributions.  No evidence assisted me to see whether the contribution so claimed ought be likely to attract much weight.  The husband was expansive in his evidence about his financial contributions during the marriage through compensation claims, redundancy payments, severance pay and legal proceedings.  However, these occurred when the parties were together.  It was only in cross-examination that he said that there were extra sums in addition to these capital payments contributed by him because he had been working and earning an income whilst these compensation payments were being negotiated and paid.  It is difficult for me to assess whether that would have affected the settlement if it had been undertaken at the time with proper advice. 

31. There is also the unchallenged evidence of the wife receiving the other property and it would seem unlikely that the husband had anything to do with it.  That might encourage a judge to approach the division of assets on an asset by asset basis. 

32. There is also evidence about the gambling but I am not in a position to conclude the correct quantum and could not say whether any adjustment would have been made in the husband’s favour as a result of it. 

33. The wife was cross-examined about an interest that she had in a family trust controlled by her father.  She denied understanding what it was all about whilst acknowledging that there was a period where her father took advantage of her position as a beneficiary of the trust to make a tax effective distribution.  However I find there is no evidence from the husband as to what (if any) other distributions were made during the marriage which might be classed as a contribution by the wife.  Indeed, the wife’s evidence was that this trust was considered and dealt with in her father’s divorce.  I do not know whether loan accounts existed before or after that divorce and whether or not they would have affected a settlement between the husband and the wife.  It is clear on the husband’s evidence that the trust was something that existed but that is as far as it goes. 

34. Thus, at best, this evidence enables me to find that on the known facts, the distribution of assets in 2005 was largely uncontroversial.  Further, absent any agreement by the wife about a $60,000 loan, I could not find that the husband was specifically entitled to a payment of that sum.  All of that becomes relevant on the question of hardship.

35. Turning to the approach as required by the law, it was common ground that the husband needed leave to proceed with any application under Part VIII of the Act.

36. Relevantly, s 44(3) of the Act provides that where a divorce order has taken effect, property proceedings shall not be instituted after 12 months from that date except by leave of the court. The approach to dealing with a leave application where a time limit has not been met is well known (see Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541 as followed by the Full Court in Sharp & Sharp [2011] FamCAFC 150). It is not just a formality.

37. Section 44(4) is clear in providing that the court shall not grant leave under subsection (3) unless certain criteria are satisfied. Those principles have been canvassed a number of times by various courts but I shall refer to them again because they act as the guide for this determination.

38. Because of s 44(4)(a), it must be established that hardship would be caused to the husband if leave were not granted. If hardship is established, the husband still has to persuade the Court that its discretion should be exercised (see Whitford& Whitford (1979) FLC 90-612.)

1. The husband must demonstrate hardship which involves considering whether he has an arguable case. Despite the limited nature of the evidence normally presented on an interlocutory application, both parties dealt with their respective financial histories comprehensively and both had the opportunity (albeit in a limited way) to cross-examine the other. All parties were represented by solicitor and counsel.  I therefore have a reasonable picture from the tested evidence. 

2. It is important to note that hardship is more than the loss of a right to commence proceedings. It is the consequence arising from the loss of the right to commence proceedings (see Sharp (supra)).

3. In Swallow & Swallow an unreported decision of Emery J in 1977, his Honour said:

   (t)he mere loss of the right is not in itself hardship. The right lost… must be a right which in all circumstances is substantial.

   ..to come within the provisions of this section an applicant must establish:-

   (a)      a prima facie case which is in the circumstances substantial;

   (b)      that to deny the right to litigate that claim would cause hardship in the sense referred to above to a party or to a child of the marriage;

   (c)      that there is an adequate explanation as to why the claim was allowed to elapse.

   In McDonald & McDonald(1977) FLC 90-317, Evatt CJ referred to Swallow with approval and then added:

   I would add the following comment that the court may also think it appropriate to consider the question of prejudice to the respondent and that in this connection the period of delay in making the application to institute proceedings may itself be a relevant factor.

4. A determination under s 44(3) therefore necessitates a clear distinction to be made between the proof of hardship and a consideration of the consequential exercise of the discretion (See in particular Whitford (supra) at 78,145; Cox & Cox (1981) FLC 91-068; Walker & Walker (1984) FLC 91-564. See also Hedley & Hedley [2009] FamCAFC 179; (2009) FLC 93-413).

5. To succeed, the husband must have an arguable claim worth pursuing or a “real” probability of success. (see Sharp (supra))

6. Whether or not hardship exists is not to be assessed only by reason of the monetary value of the probable order to be made if leave were granted.

7. In Whitford, the Court said that if there was no real probability of success, a court could not be satisfied that hardship would be caused if leave were not granted. Thus, the Full Court pointed out the following:

   (a)As a general proposition it might be said that, the inability of an applicant to pursue a claim which in the circumstances of the applicant or a child of the marriage is trifling, generally will not cause hardship;

   (b)Similarly, where the costs which the applicant will have to bear himself or herself are about as much or more than what the applicant is likely to be awarded on a property claim, ordinarily hardship would not result if leave to institute proceedings were not granted; but

   (c)otherwise nothing in either s 44(3) or 44(4) says that the right or entitlement lost must be a substantial one.

8. If the applicant demonstrates hardship, it is appropriate to decide whether or not to exercise the discretion. As was said in Whitford (at 78,146) 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 of 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. Importantly, so as not to fetter the discretion, the Full Court said these examples were not necessarily the only ones.

9. Here, the husband said that there was a large financial disparity between he and the wife but when that evidence is analysed, it is clear that most of her acquired wealth has come from post separation windfalls. The husband’s contribution to that must be seen as minimal but I accept that such a disparity may be a consideration for s 75(2) purposes.

10. As his counsel pointed out, if the amount the husband was pursuing was $60,000, such a sum for him was very significant having regard to his age and earning capacity whilst it may not be so for the wife.

11. As for delay, the husband acknowledged he had obtained a court pamphlet about the time requirements when he filed for divorce. He said the pamphlet had lots of information in it. When specifically asked about the 12 months rule, he volunteered that “it” (the pamphlet) said a person could get leave and he considered that likely because he had the certificate of title in his possession thinking that his retention of the title had to be resolved. He confirmed for a second time in his evidence that the pamphlet referred to a time limit with the leave prospect. That evidence was clear in cross-examination yet in his trial affidavit (at paragraph 27), he said that the first time he became aware of the time restriction was in May 2012 when he obtained legal advice from his current solicitors. Those relatively innocuous pieces of evidence create doubt in my mind about his general truthfulness. On any view however, I find he did know of the requirement to bring the proceedings within 12 months and that he held off tactically because he had the title. Just when he was going to raise the issue again is hard to fathom because the wife had already bought her house. It was suggested to the husband that he waited until the wife received her inheritance and that seems plausible. Bearing in mind the strong contextual statement beginning s 44(4) and the fact that the husband seeks an indulgence if hardship was shown, his truthfulness becomes very important.

12. Whilst prejudice to the wife is a consideration, it is not something that is of great significance here. Prejudice is intended to refer to the problems caused to memory and loss of documents which arise where there has been a delay. I do not believe there is any strong prejudice to the wife here in any event.

13. The deciding factor here concerns the merits of the husband’s substantive claim.  Given the assets as the parties physically divided them, my rejection of any agreement about a sum of $60,000 (or any similar amount) being a loan, the husband giving the wife the extra money when no house purchase was likely and finally, the likely costs to be borne by the parties in pursuing any s 79 proceeding, the husband has not established that if leave was not granted, he would suffer the requisite hardship. Bearing in mind the requirement of a court only to make an adjustment order if it was just and equitable to do so, taking into account all of the other matters in s 79, I doubt whether the husband would receive any money or any specific property either. It is therefore my view that he has not demonstrated that there is a reasonable claim to be heard.  His application for leave must fail.

I certify that the preceding Fifty One (51) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 6 February 2013.

Associate: 

Date:  6 February 2013