December 2018 Family Law Case Watch
By Prue Hawkes & Stephanie Ordanoska
What is required to initiate Property proceedings when you separated from your de-facto spouse a significant time ago?
Section 44(5) of the Family Law Act 1975 (Cth) (“the Family Law Act”) allows de-facto parties to initiate proceedings in respect of property or maintenance orders in de facto relationships if the application is made within the period (the standard application period) of:
- Two (2) years after the end of the de-facto relationship; or
- 12 months after a financial agreement between the parties was set aside or found to be invalid; or
- Both parties consent to the application.
The Act provides that proceedings may be instituted “out of time” in certain situations. In the recent case of Gadzen & Simkin  FamCAFC 218, the Family Court considered in detail the application of that law and explained what type of circumstances qualify.
Mr Gadzen (“the de facto husband”) and Mrs Simkin (“the de facto wife”) commenced cohabitation in 2001. The de facto husband was then aged 51 years and the de facto wife was aged 45 years. There were no children of the relationship and the parties separated in 2009. The parties since married other parties, with the de facto wife commencing cohabitation with her current husband in 2013 and marrying him in 2016.
At the beginning of the relationship the de facto wife had net assets worth a total of $83,000. The de facto husband’s total net assets were valued at $4,750,000, which included various residential properties, businesses and trust interests. It was undisputed that the de facto wife made no direct or indirect financial contribution to the acquisition, conservation or improvement of the de facto husband’s various properties or businesses.
During the relationship, the de facto husband contributed significantly to the de-facto wife’s finances. The de facto husband added the de facto wife to his self-managed super fund, contributing $100,621 to her membership in that fund. On 27 March 2015 the de facto wife withdrew her membership with that fund and an amount of $213,118 was rolled out to the de facto wife’s nominated superannuation fund.
Later in their relationship, the de facto husband established a family trust for the de facto wife and transferred fifty (50) per cent of his shareholding in one of his companies to that trust for no consideration. The de facto wife’s shareholding in that Trust was transferred back to the de facto husband following separation in about 2015 for $25,000, a sum significantly less than its initial value.
It was undisputed that following separation the de facto husband continued to make financial contributions to the de facto wife by way of informal agreements between the parties, including:
- Paying a deposit of $100,000 on the purchase of residential premises in the de facto wife’s sole name and making interest-only mortgage repayments on behalf of the de facto wife until the end of December 2017, totalling $268,301;
- Paying the de facto wife’s rent from separation in April 2009 until the purchase of the above property in October 2010, totalling $31,199;
- Purchasing furniture and electrical equipment for the de facto wife in the sum of $20,000;
- Providing a legacy to the de facto wife in the sum of $1,000,000 in his Will with the terms of such Will to remain unchanged for two (2) years; and
- Giving to the de facto wife one third of the balance of his superannuation account, The Gadzen Superannuation Fund.
The de facto wife filed an application on 25 January 2018 seeking orders under section 90SM and 90SE of the Act for the purpose of property and maintenance orders. The Application filed by the de facto wife was seven (7) years out of time and therefore required the Court to determine whether leave should be granted for the proceedings to be dealt with.
As set out above, section 44(5) of the Family Law Act provides the standard application period for initiating proceedings, generally speaking, this requires proceedings to be initiated within two (2) years of a de facto relationship breaking down (in the case of a marriage, section 44(3) provides the standard application period as twelve (12) months from the date of divorce or decree of nullity).
Pursuant to section 44(6) of the Act (or section 44(4) in the case of a marriage), the Court may grant a party leave to apply after the end of the standard application period if it is satisfied that:
- Hardship would be caused to the party or a child if leave were not granted; or
- 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.
Section 44(4) in the case of a marriage and section 44(6) in the case of de facto relationships are in identical terms and, for practical purposes, the requirement for granting leave under section 44(6) will follow the authorities in respect of section 44(4).
Section 44(4) was considered in the earlier case of Whitford and Whitford in which the Court emphasised that hardship within the meaning of the section must first be established for the Family Court to exercise its discretion and grant leave. In discussing hardship, the Full Court in Whitford said:
The hardship referred to in section 44(6) is the hardship which would be caused to the applicant… if leave were not granted. The loss of the right to institute proceedings is not the hardship to which the subsection refers.
In Sharp the Court noted that:
Hardship is more than the loss of a right to commence proceedings. It is the consequences attending the loss of the right to commence proceedings that constitutes hardship.
In assessing hardship… the applicant must have a prima facie claim worth pursuing or a “real” possibility of success.
The meaning of “hardship” in subsec. 44 (4) is akin to such concepts as hardness, severity, privation, that which is hard to bear or a substantial detriment.
These authorities provide that, in determining an application for leave, the applicant must demonstrate a prima facie or arguable case and, having regard to all of the circumstances, that if it were not heard would result in hardship to the applicant or a child of the marriage. This will take into account the costs or likely costs to be incurred in pursuing a claim.
At First Instance
In the present case of Gadzen & Simkin the trial judge found that the de facto wife would suffer hardship if leave were not granted for her to bring property settlement and maintenance proceedings against the de-facto husband and made an Order granting leave.
In determining the question of hardship the trial judge extracted a segment of the de facto wife’s Affidavit, outlining her current income and expenses and the fact that the de-facto husband ceased paying mortgage payments. On this evidence the trial judge found that hardship was established.
It was found that the trial judge erred in determining the question of hardship as she failed to undertake any consideration of whether the de facto wife had a prima face or arguable claim and whether the loss of her right to make that application would lead to hardship that was substantial having regard to all the circumstances of the case, including her potential costs in pursuing that claim.
The Full Court found that in all of the circumstances, the de facto wife received very significant benefits post-separation. In total it was estimated that the de-facto wife had received $467,121 in post separation benefits and it was estimated that she would expend approximately $150,000 pursuing her claim.
Taking into consideration all the evidence, the Full Court found that even if the de facto wife’s potential claim succeeded, it was unlikely to equate to, let alone exceed, the benefits which she already held, together with what she had received from the de facto husband following separation.
It is possible to initiate Court proceedings where separation occurred a significant time ago however hardship must be proved in order for the Family Court to grant leave to make an application after the standard application period. In making this determination, the Court must have regard to all of the circumstances of case.
We hope that our December 2018 Case Watch has provided you with some clarity about the role of the Family Court where proceedings are initiated out of time.
If you have separated or have a Family Law enquiry, please contact us on (02) 9437 0010 or firstname.lastname@example.org to discuss your matter in complete confidence. We are conveniently situated in St Leonards on Sydney’s Lower North Shore and have a team of experienced and caring professional family lawyers available to help you.
These posts are only intended as an overview or comment on current issues that may interest you and are not legal advice. If there are any matters that you would like us to advise you on, then please contact us.