V and S

[2006] FCWA 2

JURISDICTION:

FAMILY COURT OF WESTERN AUSTRALIA

ACT: FAMILY COURT ACT 1997

LOCATION: PERTH

CITATION: V and S [2006] FCWA 2

CORAM: THACKRAY J

HEARD: 21 NOVEMBER 2005

DELIVERED: 6 JANUARY 2006

FILE NO/S: PT 4718 of 2005

BETWEEN: V

Applicant/Mother

AND S

Respondent/Father

Catchwords:

Leave to commence proceedings for property settlement out of time - de facto marriage.

Legislation:

Family Court Act 1997, s 205ZB(1), s 205ZB(2), s 205ZD(3)

Category: Not Reportable

Representation:

Counsel:

Applicant: Mr F Sammut

Respondent: Mr A Lloyd

Solicitors:

Applicant: F Sammut & Co

Respondent: A J Lloyd

Case(s) referred to in judgment(s):

Althaus & Althaus (1982) FLC 91-233

Atwill & Atwill (1981) FLC 91-107

Carlon & Carlon (1982) FLC 91-272

Frost & Nicholson (1981) FLC 91-051

Jacenko & Jacenko (1986) FLC 91-776

Neocleous & Neocleous (1993) FLC 92-377

Whitford & Whitford (1979) FLC 90-612

1[Ms V] (“the applicant”) and [Mr S] (“the respondent”) lived in a de facto marriage relationship from 1989 until 2 [A] 2004. On

31 August 2005, the applicant filed an application seeking leave to commence proceedings for property settlement out of time.

The law

2Section 205ZB(1) of the Family Court Act 1997 provides that applications for property settlement between parties to a failed de facto marriage must be made within one year after the relationship ended. However, s 205ZB(2) provides that “the court may grant ... leave to apply after the application period if satisfied that hardship would be caused to a de facto partner if leave were not granted”.

3Section 205ZB(2) is similar to, but not as broad as, s 44(4) of the Family Law Act 1975. Both provisions mandate a two-step process in determining applications for leave. First, the Court must be satisfied hardship would be caused to the applicant if leave were not granted. Secondly, the Court must determine whether, in the exercise of its discretion, leave should be granted.

4 In Neocleous & Neocleous (1993) FLC 92-377, Fogarty and

Nygh JJ said (at 79,915):

“Hardship is caused by the inability of a person to pursue a claim which in the circumstances of the case appears on the prima facie evidence to be substantive and not merely trifling…”

5 The Full Court has said in Whitford & Whitford (1979) FLC

90-612 (at 78,145):

“In ordinary parlance, hardship means something more burdensome than “any appreciable detriment”. We consider that in subsec. 44(4) the word should have its usual, though not necessarily its most stringent, connotations. It is impossible to lay down in advance what particular facts may or may not amount to hardship in the relevant sense.”

6It is well established that the mere loss of the right to litigate is not in itself hardship. In order to prove “hardship”, it must appear that the applicant would probably succeed if the substantive application were heard on its merits. 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: Whitford and Whitford (supra).

7If I am persuaded hardship would be caused by refusing to grant leave, I must still determine in the exercise of my discretion whether leave should be granted. Matters to be considered in the exercise of the discretion include:

•The extent of the delay and the reasons (or absence of reasons) for the delay. Althaus & Althaus (1982) FLC 91-233.

• The extent of the hardship the applicant would experience if leave were not granted. Carlon & Carlon (1982) FLC 91-

272.

• The extent of the prejudice that would be caused to the respondent if leave were granted. Nygh J in Frost & Nicholson (1981) FLC 91-051 at 76,425 said that prejudice in this context “means that a party is faced with an action which he or she had no reason to expect or had been led to believe would not be brought”. However, as Nygh J also pointed out in Atwill & Atwill (1981) FLC 91-107, the fact the respondent will suffer prejudice does not mean that the discretion will be exercised in his favour. His Honour said (at 76,794) the prejudice would need to be “distinctly observable hardship, such as financial commitments made on the basis that no liability existed”.

8Applications for leave to commence proceedings out of time are generally dealt with on the basis that the applicant’s evidence is presumed to be correct, unless it is inherently unbelievable or contradictory: Jacenko & Jacenko (1986) FLC 91-776. The background “facts” set out below are therefore largely the assertions made by the applicant.

Background

9The applicant and respondent commenced living in a de facto relationship in 1989 and separated in [A] 2004.

10 There are two children of the relationship: [A], aged 15, and [S], aged 12. After separation, the children resided with the applicant until late 2004, when they went to live with the respondent. However, they came back to live with the applicant in September 2005, a few weeks after the application for leave was filed. According to the respondent, [A] wanted to move back to live with him in October 2005, but he would not permit her to do so. Nevertheless, he believes the children should be living with him and will allow them to do so if they wish, but only on certain conditions.

11 The parties had few assets at the commencement of cohabitation. The respondent owned a block of land, but it was

mortgaged almost to the full extent of its value. The respondent worked for [a company] during the relationship. The applicant looked after the home and the children. She also worked when she could on a casual or part-time basis.

12 By the time they separated the parties’ principal assets comprised:

• Their home, the value of which at the time is in dispute.

• The respondent’s [company] shares worth $86,521. There would be tax consequences associated with sale of the shares.

• The respondent’s superannuation, “valued” at $78,507.

• Furniture, which the respondent says the applicant largely took and which he estimates was worth $17,000 second hand.

• A Daewoo vehicle worth $9,000.

• Other assets to a value of $13,100, which the respondent retained.

13 The only significant debt was the mortgage on the home of

$100,000.

14 On the applicant’s evidence, the net assets were worth

$505,128 – counting the superannuation as an asset and ignoring the tax issues associated with the [company] shares and the superannuation.

15 After the parties separated, they had private discussions about their financial affairs. They reached an agreement that the applicant would receive a payment of $150,000 from the respondent, in return for which she would transfer her interest in the home to him. She kept the Daewoo and most of the furniture. The applicant used the $150,000 to buy a home of her own. The respondent obtained the money by borrowing against the title to the former residence.

16 The applicant claims that the $150,000 payment represented one half of the equity in the former home because she asserts it was agreed the property was worth $400,000. The respondent disputes this and says he had a market appraisal advising that the home should be offered for sale at a price between $365,000 and

$375,000. He says the payment he made to the applicant was intended to resolve all property settlement issues between them,

whereas the applicant says the settlement failed to take account of

the shares and superannuation the respondent retained. She claims that if the matter was litigated, she would receive more than the

$150,000 she has already received.

17 The applicant consulted a solicitor in February 2005. The solicitor wrote to the respondent on 18 February 2005, seeking half of the [company] shares. This correspondence was sent before the limitation period expired. The respondent’s solicitor replied on 28

February 2005. He took issue with the applicant’s claim that the home had been worth $400,000. He forwarded with his correspondence a copy of the market appraisal his client claims to

have obtained shortly after the parties separated.

18 The applicant then obtained a market appraisal of the home, which was forwarded to the respondent’s solicitor on 3 May 2005. However, by this time, the limitation period had expired. The respondent’s solicitor did not reply to the correspondence. These proceedings were then instituted on 31 August 2005.

Hardship

19 The applicant works as a kitchen hand and earns only a very modest income. The two children are living with her. She receives child support from the respondent. She has not re-partnered. She has the assets she took with her at the time of separation and she has the home she purchased with the payment she received from the respondent. She claims the home is worth $215,000 and she owes $68,000 on the mortgage.

20 The respondent is a mechanical technician and continues to work for [the company]. He earns about $90,000 per annum. He also has not re-partnered. In addition to paying child support for the girls, he also meets their school fees. He has the assets he received in the earlier settlement.

21 On her evidence, the applicant received only somewhere in the region of 35% of the asset pool when the parties originally divided their property. On the respondent’s evidence, she received something closer to 38%.

22 Counsel for the respondent, in his most helpful written submissions, argued that a 62:38 apportionment would have been within the range of results the Court would have been likely to order in circumstances where the children were residing with the respondent. He also argues that even though the children are

presently with the applicant, it is more likely than not they will end up living with the respondent.

23 The latter proposition is, of course, very difficult to establish on the basis of untested affidavit evidence. The only matter beyond dispute is that at the date of the hearing of the application for leave, the girls were living with the applicant. If the applicant were granted leave to institute proceedings, the Court would deal with the matter in the light of the current situation and, to the extent possible, on a prognosis of the likely future position, which would include an assessment of where the girls are likely to be living.

24 If the Court were to determine that it is likely the applicant would be the primary carer of the children in the future, it is likely, in my view, that the applicant would receive a settlement significantly greater than what she has received to date. It may well be the case she would be required to take a proportion of the additional settlement in the form of superannuation, but this would nevertheless be an appreciable benefit to the applicant. Based on the applicant’s evidence, the applicant’s settlement is unlikely to be less than 60% of the asset pool. I am aware that the respondent has raised issues of wastage by the applicant, which could have an impact on the outcome, but I do not consider it appropriate to take those untested matters into account in assessing the application for leave.

25 Even if the children were likely to be living with the respondent in the future, the settlement the applicant has received to date would still appear to me to be outside the range of likely outcomes. The applicant earns a very low income, whereas the respondent is a high income earner. The parties’ contributions appear, on the applicant’s evidence, to have been equal. The s

205ZD(3) factors favouring the applicant (principally the disparity in income) would be likely to match those favouring the respondent (principally the care of the children). The applicant’s settlement is therefore likely to be not less than half of the asset pool, whereas she has received less than that to date.

26 In these circumstances, I am satisfied hardship would be caused to the applicant if leave were not granted, since she has a prima facie claim to a settlement well in excess of what she has received to date.

Discretion

27 In my view, the matter of most significance in determining whether to exercise my discretion in favour of the applicant is the

fact that the parties began negotiating through their solicitors before the limitation period expired. Parties should be encouraged to resolve matters by correspondence rather than litigation. Had the applicant’s solicitor simply filed an application, rather than writing a letter inviting negotiations, the respondent would have been powerless to prevent the proceedings continuing, since the earlier settlement did not preclude the Court from dealing with the matter on its merits.

28 It is regrettable, of course, that what appears to have been the negligence of the applicant’s solicitor has put both parties to the expense of dealing with this application for leave. I presume negligence is involved, since no effort was made in the very flimsy material filed on behalf of the applicant to explain why the time period was allowed to elapse. Nevertheless, the delay was not great, given that the parties were engaged in negotiations and given that it would have taken some time for it to become apparent that the respondent did not intend to reply to the letter of 3 May 2005.

29 The prejudice to the respondent, in the sense discussed above, is not great. All he has done is to incur the expense of obtaining funds to pay out the applicant. That expense would not have been substantial, especially when compared to the loss the applicant would sustain if she were not permitted to litigate her claim. In the long run, both parties may be better off as a result of having reached the settlement which resulted in both of them owning a property. It is well known that the real estate market has risen sharply over recent times. Had the settlement not been reached, the matter may still not have reached trial in this Court. The likelihood is that by this time the parties would still have owned one, not two properties.

30 I have considered the matters raised in paragraphs 27 to 29 of the written submissions made by the respondent’s solicitor, however, I consider those matters are too speculative to warrant any serious consideration.

Accordingly, I consider in the exercise of my discretion that the applicant should be granted leave to commence proceedings for property settlement, provided she commences proceedings promptly.

Orders

31 I will hear from counsel about the time the applicant should be allowed to commence her application and I will also hear argument about who should be responsible for the costs of the application.

I certify that the preceding [31] paragraphs are a true copy of the reasons for

judgment delivered by this Honourable Court

Associate