Thallis and Sanders

[2015] FCCA 237

FEDERAL CIRCUIT COURT OF AUSTRALIA

THALLIS & SANDERS [2015] FCCA 237

Catchwords:
FAMILY LAW – Application for leave to commence proceedings out of time – proposed proceedings for property adjustment consequent upon breakdown of de facto relationship – no hardship proved – application dismissed.

Legislation:

Family Law Act 1975, ss.44(5), 44(6), 44(6)(a), 90SM

Federal Circuit Court Rules 2001, rr.24.02(2), 24.14

Hedley & Hedley [2009] FamCAFC 179

Applicant: MS THALLIS

Respondent: MR SANDERS

File Number: BRC 4658 of 2014

Judgment of: Judge Jarrett

Hearing date: 10 October 2014

Date of Last Submission: 10 October 2014

Delivered at: Brisbane

Delivered on: 6 February 2015

REPRESENTATION

Solicitor for the Applicant: Ms O’Brien

Solicitors for the Applicant: Porta Lawyers

There being no appearance by the Respondent

ORDERS

1. The application filed on 28 May, 2014 is dismissed.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRC 4658 of 2014

MS THALLIS

Applicant

And

MR SANDERS

Respondent

REASONS FOR JUDGMENT

1. This is an application for leave to commence property adjustment proceedings pursuant to s.90SM of the Family Law Act1975 outside of the time limited for that purpose by s.44(6) of the Act.

2. The applicant relies upon her application filed on 28 May, 2014 an affidavit filed by her on 28 May, 2014 her financial statement filed on 28 May, 2014 a further affidavit by her filed on 8 September, 2014 that exhibits two real property valuations, an affidavit of Mr T filed on 30 September, 2014 exhibiting the same valuations and an affidavit of Kathryn O’Brien, Solicitor, filed by leave on 10 September, 2014.

3. The application, initiating affidavit and form 13 filed by the applicant on 28 May, 2014 were served personally on the respondent on 27 June, 2014.  It appears to be the case that Mr Sanders has not been served with any of the other material in these proceedings.

4. Mr Sanders has not filed any response, nor has he appeared in the proceedings in any other way.

5. Ms Thallis can only apply for an order under s.90SM of the Family Law Act if her application is made within the period of two years after the end of her de facto relationship: s.44(5) of the Act. Her evidence is that her de facto relationship with Mr Sanders came to an end when she separated from him in late March, 2010. Accordingly, the two year period within which to commence the proposed proceedings expired at the end of March, 2012.

6. The Court, however, might grant leave to Ms Thallis to apply for an order under s.90SM of the Act notwithstanding that the two year limitation period has expired if she is able to satisfy the Court that hardship would be caused to her or a child if leave were not granted.

7. It was not suggested that her proposed claim was one for maintenance.

8. Ms Thallis and Mr Sanders commenced a de facto relationship in 2004.  According to Ms Thallis’ evidence they finally separated in late March, 2010.  They have one child X who was born in (omitted) 2009 and so is now five and a half years of age.  He lives with Ms Thallis.

9. At the commencement of the relationship Ms Thallis owned a unit at Property C.  She is the sole registered proprietor of that unit.  In 2006, Ms Thallis encumbered the unit by granting a mortgage to the (omitted) bank to secure some borrowings by she and Mr Sanders.  Although the terms of the mortgage are not in evidence, she suggests that both she and Mr Sanders are joint borrowers.

10. Both parties were working when they commenced the relationship.  They worked full time and contributed equally towards their living expenses until 2007 when Mr Sanders, according to Ms Thallis’ evidence, developed an addiction to illicit drugs.  Ms Thallis ceased work in about (omitted) 2008 and relocated to Western Australia for some time but returned to Queensland in (omitted) 2008.  She took up employment.  She worked full time up until shortly prior to X’s birth.  After he was born she had about 8 months away from work.

11. Mr Sanders worked at various places between 2004 and 2009.  According to Ms Thallis’ evidence he remains gainfully employed.  He did, following separation, relocate to Darwin for a little over two years but has returned to live in the Property C unit with his new partner and her child.

12. In 2008 the parties bought a parcel of land at Property L.  Both parties are registered as proprietors of the land as joint tenants.  The property was purchased with the assistance of funds raised on mortgage.  There is no evidence before me as to the amount paid by the parties as a deposit to purchase the property, if any.

13. Ms Thallis gives evidence that she contributed to “the majority of the expenses of the household necessities such as groceries, mortgage repayments, utilities and maintenance on the properties as well as rates throughout the relationship from 2007 and I continued to do so after separation until 2011 when I could no longer afford to continue repayments”.  She sold a motorcycle that she had in her possession so that she could use the funds to catch up on the mortgage over the Property L property.  She has used credit card facilities to finance renovations on the Property C property, although she gives no evidence about how much she incurred in that respect.

14. When the parties separated they were residing at the Property C unit.  Ms Thallis left that property and stayed with her parents for about three months.  Mr Sanders moved to his parents’ property and Ms Thallis returned to reside in the Property C unit.  She did some renovations “when we agreed to sell the property”.  I assume those are the renovations that she funded using her Mastercard.

15. At some stage thereafter Ms Thallis’s parents moved away and placed their property on the market.  She lived in their property while that happened and she rented out the Property C unit.  When her parents’ property was sold, which appears to have been in early 2011, she moved to share accommodation for about four months.  After that she moved into Mr Sanders’s parent’s granny flat for approximately nine months.  She paid board on a weekly basis. 

16. On 24 December, 2011 she relocated to the Property L property and has been residing in a caravan on that property with X ever since.

17. Ms Thallis swears:

    “31.  At separation, there was a negotiated agreement between January and February 2011, which we would arrange to have both properties (Property C and Property L properties) deliver cash in hand after sale.

    32.  We placed both properties on the market and it was discovered that we would receive equal value for each property after the mortgages were paid.  We discussed the possible outcomes and agreed in January/February 2011 that the Respondent would retain the Property C property and I would retain the Property L property.

    33.  At the time of our agreement, we would reside on separate properties.  The respondent would reside at the unit property being Property C and I would reside at Property L.  The arrangement were to look after all expenses for each respective property until we were able to refinance and have our interests in the properties transferred under our own names on the properties we are currently residing at.

    34.  At the time of our agreement, the rates and associated costs with the properties were brought up to date.  However, since the Respondent had relocated to the Property C property, I have been receiving notifications from (omitted) Bank, (omitted) City Council, and (omitted) Utilities requesting payment for arrears.

    35.  The (omitted) Loan repayment was the first in arrears in early June 2011.

    36.  The Respondent was often in financial strife and has stated to me bills are not a priority to the Respondent.

    37.  In late January 2014, I received a call from (omitted) City Council stating they were considering commencing legal proceedings to recover for unpaid rates.  I received a similar call from (omitted) Bank around the same time.”

18. Ms Thallis gives evidence that she brokered an arrangement with the (omitted) City Council so that she could repay the arrears of rates that had accrued over the Property C unit.  Ms Thallis had contact with Mr Sanders to speak to him about the arrears of rates but, according to her evidence, he has only paid to the (omitted) City Council $500 on 23 January, 2014.

19. Ms Thallis attempted to sell the Property L property in February, 2013 however there was no interest from any prospective purchaser.

20. Ms Thallis gives evidence that she sought legal advice in late January, 2014 “to receive any advice on what I could do regarding the outstanding arrears and understood that this was a Family Law issue in which I could seek legal proceedings to divide up our assets.”

21. Ms Thallis’ evidence reveals that the parties have the following assets and liabilities:

    Assets

    a)Property L  $290,000

    less (omitted) Bank mortgage            $258,000             $32,000

    b)Property C   $175,000

    less (omitted) Bank mortgage            $162,560             $12,440

    c)Subaru Outback motor vehicle  $10,000

    d)Honda (omitted) motorbike  $6,000

    Total  $60,440

    Liabilities

    a)Flexiloan from (omitted) Bank  $7,000

    b)(omitted) bank visa card (Ms Thallis)  $1,000

    c)Outstanding (omitted) City Council rates  $1,424

    Total  $9,424

    Superannuation

    a)Ms Thallis (omitted) super account   $38,347

22. There are valuations for the real estate set out above.  There are no valuations for the motor vehicles.  Despite the requirements of the Federal Circuit Court Rules2001 (rule 24.02(2)) there is no completed superannuation information form attached to Ms Thallis’ financial statement and no evidence contained in her affidavit of evidence in chief concerning her superannuation interest.

23. Mr Sanders has not participated in the proceedings.  He has filed no material and therefore, it is impossible to say what assets he presently owns.  It is likely that he has a superannuation interest, but the value of that is unknown.  Ms Thallis has not undertaken any enquiries with his employer (via subpoena or otherwise) to ascertain the identity of his superannuation fund.

24. Having regard to the above, it is apparent that the parties’ net assets are a modest $35,016 leaving aside the motor vehicle and motor cycle in Ms Thallis’ possession and her superannuation. 

25. It seems apparent from the material before the Court that if leave is refused, Ms Thallis will retain her interest in the Property L property as joint tenant subject to the mortgage to (omitted) Bank (a net equity to her of $16,000), her entitlement to the equity in the Property C unit ($12,440), she will also have her motor vehicles which she estimates to be worth $16,000 and her superannuation.  She will have liabilities, including outstanding rates to the (omitted) City Council of $9,423.75.  Thus, she will be entitled to property with a net value of $73,363.

26. In the proceedings that Ms Thallis wishes leave to institute, she seeks orders that would see her retain free of Mr Sanders’ interests, the Property L property. That is to say she would retain a property with net equity of $32,000. She proposes transferring to Mr Sanders the Property C unit together with the liabilities attached to that unit including the outstanding rates. She otherwise proposes to retain her motor vehicles and superannuation entitlements. That would leave her with net property of $78,347, or about $5,000 more than the orders she seeks to be made.

27. An application for leave to commence proceedings must be supported by appropriate evidence.  In Hedley & Hedley [2009] FamCAFC 179 Boland J explained what was required:

    127.  The procedure to be followed in an application under s 44(3) and the consideration of what is meant by “hardship” in s 44(4) are the subject of well-known authority.  The authorities have consistently recognised, whilst an application under the section is not a matter of practice and procedure, it should be summary in character (see Neocleous & Neocleous (1993) FLC 92-377 and the cases there cited at 79,914).

    128.  In Whitford & Whitford (1979) FLC 90-612 the Full Court (Asche and Pawley SJJ and Strauss J) referred to the appropriate way for proceedings to be conducted. Having said they did not consider it necessary or desirable to lay down any definitive procedural rules their Honours noted the following:

    ·   an application for leave to institute proceedings under s 44(3) is not intended to be the final hearing of the matter;

    ·   the applicant should file adequate affidavit evidence;

    ·   the respondent should have an opportunity to file an affidavit in answer to adduce material showing why leave to institute proceedings should not be granted;

    ·   in an appropriate case the applicant should have an opportunity to file an affidavit in reply;

    ·   cross-examination of either party on his or her affidavit material should be permitted.  On occasions oral evidence may be received;

    ·   if necessary, the Court may allow an applicant to conduct some investigation into the financial position of the respondent; and

    ·   the question to be borne in mind is whether leave should be granted, enabling the applicant to institute proceedings (and the extent of the proceedings and any investigation should be regulated accordingly).

    129.  Earlier authorities, including McDonald & McDonald (1977) FLC 90-317, referred to the establishment of a prima facie case which is substantial, that denial of the right to litigate that claim would cause hardship, and there is an adequate explanation as to delay. Additionally, Evatt CJ in McDonald said the Court may, in an appropriate case, take into account prejudice to a respondent.

    130.  In Althaus & Althaus (1982) FLC 91-233 Evatt CJ confirmed that ss 44(3) and (4) do not require “a detailed hearing on the merits to determine whether the applicant’s claim will succeed”. Her Honour said:

    …The exercise is to determine whether there is a reasonable claim to be heard. That is the essence of the inquiry into whether hardship will be suffered by denying the applicant the right to litigate that claim.

    131.  In Whitford the Full Court conducted an expansive discussion of what will constitute hardship.  Their Honours noted:

    ·   the loss of the right to institute proceedings is not the hardship to which the subsection refers, but the consequences of the loss of that right;

    ·   the hardship, if leave is not granted, implies that the applicant would probably succeed if the substantive application were heard on the merits;

    ·   if there is no probability of success the Court cannot be satisfied that hardship will be caused if leave were not granted;

    ·   if the probable result of the hearing on the merits is that hardship is not likely to be alleviated then the Court cannot be satisfied that the applicant would suffer hardship if leave were not granted; and

    ·   the right or the entitlement to be lost if leave is not granted should not be trifling or likely to be outweighed by the costs of the proceedings.  However, it is not necessary to establish the loss must be a substantial one. 

    132.  The Full Court concluded that if a court is satisfied hardship would be caused if leave were not granted, the court should then, as a second step, consider whether to exercise its discretion to grant leave or to refuse such leave.  It is relevant to note that the Full Court, at 78,146, saw the nature of the jurisdiction to be exercised by the Court required 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.

    133.  In Neocleous the majority, Fogarty and Nygh JJ, discussed the Full Court decision in Whitford.  The majority explained that the remarks in Whitford were clearly obiter.  They went on to say:

    As we see it, the essence of the remarks in Whitford as further exemplified by decisions such as Jacenko, is that the judge must always bear in mind that the only question to be determined is whether leave should be granted to enable proceedings to be instituted and this should govern the procedure before him or her. For that reason it will often be undesirable to allow cross-examination on any issue which will or can be fully litigated at the principal hearing or on any issue which is not immediately relevant to the question of granting leave.

28. Further, in the same case Cronin J said:

    216.  In property proceedings, s 44(3) requires only a limited inquiry in relation to whether or not hardship would be caused to a party (or a child) if leave were not granted.  That same limited inquiry in relation to maintenance is whether at the end of the period within which the proceedings could have been instituted without leave, the circumstances of the applicant were such that he or she would have been unable to support himself or herself without an income tested pension, allowance or benefit.

    217.  In relation to property matters therefore, the applicant must set out in affidavit form what the hardship would be if leave was not granted.  The respondent must have a right of cross-examination on those facts put in issue but it must be limited bearing in mind the onus of proof lies with the applicant to establish hardship on the balance of probabilities.

    218.  If the applicant is able to establish hardship, a court is obliged to then consider whether or not to exercise the discretion to grant the leave sought.  An applicant must therefore also set out in affidavit form any material which would support the court exercising its discretion in the applicant’s favour. That material includes but is not limited to, the length of the delay, the adequacy of the explanation for the delay, the prejudice occasioned to the respondent by reason of the delay and the strengths of the applicant’s case.  (See Whitford; Hall and Hall (1979) FLC 90-679; Cox and Cox (1981) FLC 91-068). These matters too may be subjected to limited cross-examination by the respondent bearing in mind that an affidavit will have been filed putting the respondent’s position in relation to how the delay has affected him or her.

    219.  It is not appropriate for a court in a limited s 44(3) hearing to conduct the proceedings as if it was an application under s 79 of the Act.  Each of the defined steps in s 79 carry subjective judgments.  In a s 44(3) application, the applicant need only establish that there is a case to be argued bearing in mind those subjective judgments in s 79.

    220.  As part of the discretionary process, when examining the strengths and weaknesses of the applicant’s proposed claim, a court is obliged to bear in mind that an applicant with a weak case has a right to be heard provided the matters set out above are established.

    (my emphasis)

29. Ms Thallis has not filed an affidavit in which she sets out the hardship that she says would flow if the extension of time that she seeks is not granted.  No submissions were made that even attempted to highlight the hardship it is said that she, or the parties’ child, would suffer.

30. The outcome contended for by Ms Thallis is little different to the outcome (by value) which presently exists given the parties’ ownership of the relevant property.  Having regard to the facts that I have set out above, if the orders that Ms Thallis proposes to seek in the property adjustment proceedings are made she might, perhaps, be about $5,000 better off than she is now.  But that assumes that Mr Sanders was co-operative with the implementation of any orders that a court might make.  Moreover, there is no evidence before about the costs associated with her pursuit of those proceedings, although I note that I was pressed to determine the application for leave and the substantive proceedings at the same time given that Mr Sanders has shown little interest in them.

1. Ms Thallis would gain very little from the proceedings except a reorganisation of the parties’ assets.  That is not an insignificant outcome, but as matters presently stand, she is not without interests in the property I have identified above.  She presently has a greater entitlement to the parties’ real property than does Mr Sanders.

2. Although she seeks a reorganisation of the parties’ liabilities, she proposes that the reorganisation be achieved by the ordering of cross-indemnities.  There is not much evidence to suggest that the indemnity from Mr Sanders would be worth very much.  She does not seek to have her liability to the parties’ creditors adjusted, insofar as those creditors are concerned, by orders directly against the creditors.    

3. In my view, Ms Thallis does not demonstrate hardship as she is required to do.  She has not sought to articulate any particular hardship that would flow to her by a refusal of leave.

4. In any event, even if I am wrong about that and the loss of the ability to reorganise the parties assets and liabilities in the way in which Ms Thallis proposes is hardship for the purposes of s.44(6)(a) of the Act, as a matter of discretion I would decline to grant leave because:

   a)the delay is substantial – some 2 years and 2 months; and

   b)there is no explanation for the delay in not commencing the proposed proceedings in time, let alone an adequate explanation. 

5. I have recounted Ms Thallis’ evidence above. She gives no explanation for her failure to act sooner than she has in instituting proceedings.

6. Her evidence establishes that she reached an agreement with Mr Sanders about the reorganisation of their financial affairs consequent upon the breakdown of their relationship.  But she gives no evidence that Mr Sanders will no longer honour the agreement.  The only evidence that bears on that issue, although perhaps only slightly, is that he has failed to pay all of the rates for the Property C unit and that the mortgage on the unit at times has been in arrears.  If it is the case that she is suggesting that his failure to make those payments is an indication by him that he will no longer honour their agreement, it begs the question: why didn’t she commence proceedings much earlier?  On her own evidence he fell into arrears with the mortgage on the unit at least once in June, 2011.  The time limit for the commencement of proceedings did not expire until late March, 2012.

Conclusion

1. I am not satisfied that Ms Thallis or X will suffer hardship if leave is not granted to her to commence the proceedings that she proposes.  Moreover, as a matter of discretion I would refuse leave for the reasons set out above.

I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of Judge Jarrett

Date:       6 February 2015