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I’m Out Of Time! Can I Still Issue For Property Settlement In Court?

Section 44(3) of the Family Law Act 1975 (“the Act”) provides that a party to a marriage can apply for orders for property settlement or maintenance if an application is filed within 12 months after the date of divorce.

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8 July 2019

By: Winning Wang

What does the law say about out of time property settlements?

Section 44(3) of the Family Law Act 1975 (“the Act”) provides that a party to a marriage can apply for orders for property settlement or maintenance if an application is filed within 12 months after the date of divorce. The statutory requirements for de facto relationships are expressed in identical terms pursuant to section 44(5) of the Act but differs in that an application is to be filed within 24 months of the date of separation.

If a party wants to file an application after the 12- or 24-month timeframe, they must seek leave from the court to do so.

How does the court determine leave?

In determining if leave is to be granted to permit a party to commence property proceedings out of time, the court must be satisfied that hardship would be caused to a party or child of the relationship, if leave was not granted.

In assessing hardship, the court must be satisfied that:

  1. The party seeking to commence property proceedings out of time has a prima facie claim worth pursuing or a “real” probability of success, if the proceedings had been instituted in time;
  2. The likely costs to be incurred in pursuing the claim are not likely to outweigh any benefits the party will likely receive; and
  3. Having established the above, there is an adequate explanation that for the delay in commencing legal proceedings.

Once the above elements are satisfied, the court will then look at the prejudice which the respondent will suffer by reason of the delay.

Will the party or child suffer hardship or financial loss if leave is not granted?

In the family law context, proving “hardship” does not require a party to demonstrate they suffer poverty or great need. An affluent party may still be able to demonstrate that a refusal to grant leave to institute proceedings out of time will cause hardship. In Whitford and Whitford,[1] the Court said:

“Whatever the financial situation of an applicant may be, his or her loss of a prospective entitlement to property including money, or his or her inability to have the financial and property relations of the parties adjusted or resolved, may constitute hardship.”

The loss of the right to institute proceedings itself is not a “hardship”.[2] In assessing hardship, the Court is concerned with whether denying the applicant the right to initiate court proceedings will cause injustice, having regard to the “the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension of time.”[3]

Is there a prima facie claim worth pursuing?

A party cannot establish “hardship” if their application for property settlement is on the face of it, hopeless. The Court will not grant leave to issue proceedings out of time if a party is filing an application for property settlement with no real probability of success. When making its assessment, the Court does not undertake a detailed analysis of the merits of each party’s case as they would in a final hearing, rather the Court looks at whether there is a case to be heard at all.

Is there an adequate explanation as to the delay?

To establish “hardship” an applicant must take into account the costs or likely costs to be incurred in pursuing the property settlement claim.[4] The Court will evaluate whether the applicant’s costs to pursue Court proceedings might outweigh the benefits the applicant is likely to receive from property settlement.

Is there an adequate explanation as to the delay?

The purpose of the 12-month and 2-year limitation periods are to protect parties from property settlement claims arising from relationships that broke down many years prior and where parties may not still retain the evidence necessary for litigation. Therefore, if applying for leave to institute proceedings out of time, applicants will have to demonstrate to the Court that they have adequate reason for their delay. To do so, applicants must detail the efforts they have made to resolve property settlement matters in a timely fashion.

In the case of Ordway & Ordway,[5] the Applicant sought leave to institute proceedings 26 years out of time. The Court granted leave in circumstances where the Applicant Wife had an informal financial arrangement with the Respondent Husband and she feared disrupting the status quo by instituting proceedings.

Recent Case Study– Gadzen & Simkin

In the case of Gadzen & Simkin [2018] FamCAFC 218, the de facto wife, Ms Simkin brought an application for property settlement and spousal maintenance, seven (7) years out of time. This involved an eight (8) year relationship. There were no children. Parties separated in 2009 and both subsequently then married other parties.

At cohabitation, Ms Simkin had net assets of $83,000 and Mr Gadzen had net assets of $4.75m. It was accepted that Mr Gadzen had made the overwhelmingly greater financial contributions because of his initial financial contributions and his contributions made during the relationship.

Shortly after separation, the parties then entered into a series of informal agreements, including Mr Gazden agreeing to:

  • Purchase a residential premise for Ms Simkin limited to a maximum sum of $450,000 upon the sale of a property owned by Mr Gadzen or as soon as his financial circumstances allowed;
  • Pay Ms Simkin’s rent in the sum of $400 per week pending the purchase of a property on her behalf;
  • Purchase furniture and electrical equipment for Ms Simkin in the sum of $15,000;
  • Providing a legacy to Ms Simkin in the sum of $1m in his will with the terms of such will to remain unchanged for at least two years; and
  • Bequeath to Ms Simkin one third of the balance of his superannuation account, following the transfer of a commercial property to the fund’s trustees per a binding death benefit nomination.

The trial judge, at first instance, found that Ms Simkin would suffer hardship if leave were not granted for her to bring property settlement and maintenance proceedings. An order was therefore made granting leave.

On appeal, the Full Court found that the trial judge had:

“erred in principle in failing to apply the correct test to determine the question of hardship … it is fundamental to such a determination that consideration is given to whether an applicant for leave demonstrates a prima facie or arguable case of substance having regard to all the circumstances of the case, taking into account the likely cost to be incurred by the applicant in pursuing the claim.”

In re-exercising the trial judge’s discretion, the Full Court found that Ms Simkin had received very significant benefits post separation. She had received $467,121 in benefits post-separation and had net assets of approximately $134,600, and on her own evidence she would likely expend $150,000 pursuing her claim.

In refusing to grant Ms Simkin leave, the Full Court found that it was:

“unable to see how [her] potential claim in property settlement proceedings could conceivably approach, let alone exceed, that which she holds together with that which she has received.”

Important lesson about out of time property settlement from Gadzen & Simkin

The above case illustrates the importance of being aware that trifling and uncommercial claims in an application out of time are unlikely to succeed and that costs verses benefits are to be assessed.

[1] (1979) FLC ¶90-612, 78,145.

[2] Whitford and Whitford (1979) FLC ¶90-612, 78,144; Frost and Nicholson (1981) FLC ¶91-051, 76,423.

[3] Gallo v Dawson [1990] HCA 30, 480.

[4] Gadzen & Simkin [2018] FamCAFC 218.

[5] Ordway v Ordway [2012] FMCAFAM 624.

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